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Fossil Fuel Producing Economies have Greater Potential for Interfuel Substitution

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  • Steinbuks, Jevgenijs
  • Badri Narayanan

Abstract

This study extends the literature on interfuel substitution by investigating the role of transactions costs and technological adjustment, focusing specifcally on differences across countries with different potential for fossil fuel production. We find that fossil fuel producing economies have higher elasticities of interfuel substitution. Our simulations show that, compared to the baseline case of uniform elasticities, energy and climate policies result in a greater substitution among different sources of energy for countries with larger potential to produce fossil fuels. These results are important because they imply lower economic cost for policies aimed at climate abatement and more efficient utilization of energy resources in energy-intensive economies.

Suggested Citation

  • Steinbuks, Jevgenijs & Badri Narayanan, 2013. "Fossil Fuel Producing Economies have Greater Potential for Interfuel Substitution," GTAP Working Papers 4220, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    • Handle: RePEc:gta:workpp:4220
    Note: GTAP Working Paper No. 73
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    File URL: https://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=4220
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    Cited by:

    1. Mr. Kangni R Kpodar & Ms. Stefania Fabrizio & Kodjovi M. Eklou, 2019. "Export Competitiveness - Fuel Price Nexus in Developing Countries: Real or False Concern?," IMF Working Papers 2019/025, International Monetary Fund.
    2. Christoph Böhringer & Florian Landis & Miguel Angel Tovar Reaños, 2016. "Cost-effectiveness and Incidence of Renewable Energy Promotion in Germany," Working Papers V-390-16, University of Oldenburg, Department of Economics, revised Jul 2016.
    3. Steinbuks, Jevgenijs & Narayanan, Badri G., 2015. "Fossil fuel producing economies have greater potential for industrial interfuel substitution," Energy Economics, Elsevier, vol. 47(C), pages 168-177.
    4. Böhringer, Christoph & Garcia-Muros, Xaquin & Cazcarro, Ignacio & Arto, Iñaki, 2017. "The efficiency cost of protective measures in climate policy," Energy Policy, Elsevier, vol. 104(C), pages 446-454.

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