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Energy Prices and the Adoption of Energy-Saving Technology

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  • Joshua Linn

Abstract

This paper investigates the link between factor prices, technology and factor demands. I estimate the effect of price-induced technology adoption on energy demand in the U.S. manufacturing sector, using plant data from the Census of Manufactures, 1963-1997. I compare the energy efficiency of entrants and incumbents to measure the effect of technology adoption on the demand for energy. A 10 percent increase in the price of energy causes technology adoption that reduces the energy demand of entrants by 1 percent. This elasticity has two implications: first, technology adoption explains a statistically significant but relatively small fraction of changes in energy demand in the 1970s and 1980s; and second, technology adoption can reduce the long run effect of energy prices on growth, but by less than previous research has found.

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Bibliographic Info

Paper provided by Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research in its series Working Papers with number 0612.

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Date of creation: Apr 2006
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Handle: RePEc:mee:wpaper:0612

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Cited by:
  1. David Grover, 2012. "Knowledge versus technique in SO2-saving technological change: A comparative test using quantile regression with implications for greenhouse gas compliance," Grantham Research Institute on Climate Change and the Environment Working Papers, Grantham Research Institute on Climate Change and the Environment 99, Grantham Research Institute on Climate Change and the Environment.
  2. Spyros Arvanitis & Ley Marius, 2010. "Factors Determining the Adoption of Energy-saving Technologies in Swiss Firms – An Analysis based on Micro Data," KOF Working papers 10-257, KOF Swiss Economic Institute, ETH Zurich.
  3. Felix Groba & Barbara Breitschopf, 2013. "Impact of Renewable Energy Policy and Use on Innovation: A Literature Review," Discussion Papers of DIW Berlin 1318, DIW Berlin, German Institute for Economic Research.
  4. Klier, Thomas & Linn, Joshua, 2013. "Technological Change, Vehicle Characteristics, and the Opportunity Costs of Fuel Economy Standards," Discussion Papers, Resources For the Future dp-13-40, Resources For the Future.
  5. Stefania Lovo & Michael Gasiorek & Richard Tol, 2014. "Investment in second-hand capital goods and energy intensity," Grantham Research Institute on Climate Change and the Environment Working Papers, Grantham Research Institute on Climate Change and the Environment 163, Grantham Research Institute on Climate Change and the Environment.
  6. Stilianos Alexiadis & Konstantinos Eleftheriou & Peter Nijkamp, 2011. "Labor Market Dynamics and Technology Adoption: Theory and Empirical Evidence," Tinbergen Institute Discussion Papers 11-163/3, Tinbergen Institute.
  7. Marius Ley, 2010. "Insights into the Determinants of Innovation of Energy Efficiency," KOF Working papers 10-266, KOF Swiss Economic Institute, ETH Zurich.
  8. Joëlle Noailly, 2010. "Improving the energy efficiency of building: The impact of environmental policy on technological innovation," CPB Discussion Paper 137, CPB Netherlands Bureau for Economic Policy Analysis.
  9. Cantono, Simona, 2012. "Unveiling diffusion dynamics: an autocatalytic percolation model of environmental innovation diffusion and the optimal dynamic path of adoption subsidies," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201222, University of Turin.
  10. Luisanna Onnis & Patrizio Tirelli, 2010. "Challenging the popular wisdom. New estimates of the unobserved economy," Working Papers, University of Milano-Bicocca, Department of Economics 184, University of Milano-Bicocca, Department of Economics, revised Apr 2010.
  11. Sue Wing, Ian, 2008. "Explaining the declining energy intensity of the U.S. economy," Resource and Energy Economics, Elsevier, vol. 30(1), pages 21-49, January.
  12. Alexiadis, Stilianos & Eleftheriou, Konstantinos & Nijkamp, Peter, 2013. "Technology adoption within a search model: Evidence from OECD countries," Economic Modelling, Elsevier, vol. 33(C), pages 137-148.
  13. Steinbuks, Jevgenijs & Neuhoff, Karsten, 2014. "Assessing energy price induced improvements in efficiency of capital in OECD manufacturing industries," Policy Research Working Paper Series 6929, The World Bank.

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