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A Dynamic Analysis of Interfuel Substitution for Swedish Heating Plants

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Author Info

  • Brännlund, Runar

    () (Department of Economics, Umeå University)

  • Lundgren, Tommy

    () (Department of Forest Economics)

Abstract

This paper estimates a dynamic model of interfuel substitution for Swedish heating plants. We use the cost share linear logit model developed by Considine and Mount (1984). All estimated own-price elasticities are negative and all cross-price elasticities are positive. The estimated dynamic adjustment rate parameter is small, however increasing with the size of the plant and time, indicating fast adjustments in the fuel mix when changing relative fuel prices. The estimated model is used to illustrate the effects of two different policy changes.

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Bibliographic Info

Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 550.

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Length: 26 pages
Date of creation: 11 Jan 2001
Date of revision:
Handle: RePEc:hhs:umnees:0550

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Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
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Web page: http://www.econ.umu.se/
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Keywords: Interfuel substitution; linear-logit; biofuel; wood fuel; adjustment cost;

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References

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  1. Atkinson, Scott E & Kerkvliet, Joe, 1989. "Dual Measures of Monopoly and Monopsony Power: An Application to Regulated Electric Utilities," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 250-57, May.
  2. Joskow, Paul L & Mishkin, Frederic S, 1977. "Electric Utility Fuel Choice Behavior in the United States," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(3), pages 719-36, October.
  3. Treadway, Arthur B, 1971. "The Rational Multivariate Flexible Accelerator," Econometrica, Econometric Society, vol. 39(5), pages 845-55, September.
  4. Robert S. Pindyck, 1979. "The Structure of World Energy Demand," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661772.
  5. Caves, Douglas W & Christensen, Laurits R, 1980. "Global Properties of Flexible Functional Forms," American Economic Review, American Economic Association, vol. 70(3), pages 422-32, June.
  6. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, vol. 65(3), pages 367-83, June.
  7. Brännlund, Runar & Kriström, Bengt, 1999. "Too Hot to Handle? Benefits and costs of stimulating the use of biofuels in the Swedish Heating Sector," UmeÃ¥ Economic Studies 518, Umeå University, Department of Economics.
  8. Considine, Timothy J & Mount, Timothy D, 1984. "The Use of Linear Logit Models for Dynamic Input Demand Systems," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 434-43, August.
  9. Jones, Clifton T, 1995. "A Dynamic Analysis of Interfuel Substitution in U.S. Industrial Energy Demand," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 459-65, October.
  10. Bopp, Anthony E. & Costello, David, 1990. "The economics of fuel choice at US electric utilities," Energy Economics, Elsevier, vol. 12(2), pages 82-88, April.
  11. Considine, Timothy J, 1990. "Symmetry Constraints and Variable Returns to Scale in Logit Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 347-53, July.
  12. George E. Battese, 1997. "A Note On The Estimation Of Cobb-Douglas Production Functions When Some Explanatory Variables Have Zero Values," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 250-252.
  13. Treadway, Arthur B., 1974. "The globally optimal flexible accelerator," Journal of Economic Theory, Elsevier, vol. 7(1), pages 17-39, January.
  14. Considine, Timothy J., 1989. "Separability, functional form and regulatory policy in models of interfuel substitution," Energy Economics, Elsevier, vol. 11(2), pages 82-94, April.
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Cited by:
  1. Brännlund, Runar & Lundgren, Tommy, 2005. "Swedish Industry and Kyoto – An Assessment of the Effects of the European CO2 Emission Permit Trading System," UmeÃ¥ Economic Studies 668, Umeå University, Department of Economics.
  2. Jevgenijs Steinbuks, 2012. "Interfuel Substitution and Energy Use in the U.K. Manufacturing Sector," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
  3. Hammar, Henrik & Sjöström, Magnus, 2011. "Accounting for behavioral effects of increases in the carbon dioxide (CO2) tax in revenue estimation in Sweden," Energy Policy, Elsevier, vol. 39(10), pages 6672-6676, October.
  4. Hammar, Henrik & Lundgren, Tommy & Sjöström, Magnus, 2006. "The significance of transport costs in the Swedish forest industry," Working Paper 97, National Institute of Economic Research.

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