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The Impact of Energy Prices on Technology Choice in the United States Steel Industry

Author

Listed:
  • Gale A. Boyd
  • Stephen H. Karlson

Abstract

In the last 30 years, U.S. steel producers have replaced their aging open hearth steel furnaces with basic oxygen (BOF) or large electric are furnaces (LEF). This choice of technology creates the opportunity to substitute electricity for fossil fuels. We extend earlier research to investigate whether energy prices affect this type of technology adoption. The econometric model uses the "seemingly unrelated Tobit" method to capture the effects of the industry's experience with both technologies, technical change, and potential cost reductions, as well as energy prices, on adoption. Men we include the prices of electricity and coking coal as explanatory variables, the four energy price coefficients have the signs predicted by the law of demand, but the magnitude of the coefficients is such that the non-price terms are more important, e.g. a 50% increase in electricity prices would delay LEF adoption by only 12 days. Our results suggest that the adoption of LEF represents a form of major process technical change (factor biased - electricity using), rather than a price-induced technological innovation.

Suggested Citation

  • Gale A. Boyd & Stephen H. Karlson, 1993. "The Impact of Energy Prices on Technology Choice in the United States Steel Industry," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 47-56.
  • Handle: RePEc:aen:journl:1993v14-02-a03
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    Citations

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    Cited by:

    1. Gamtessa, Samuel & Olani, Adugna, 2016. "How Does Energy-Cost Lead to Energy Efficiency? Panel Evidence from Canada," Queen's Economics Department Working Papers 274694, Queen's University - Department of Economics.
    2. Löfgren, Åsa & Millock, Katrin & Nauges, Céline, 2008. "The effect of uncertainty on pollution abatement investments: Measuring hurdle rates for Swedish industry," Resource and Energy Economics, Elsevier, vol. 30(4), pages 475-491, December.
    3. Stavins, Robert & Jaffe, Adam & Newell, Richard, 2000. "Technological Change and the Environment," Working Paper Series rwp00-002, Harvard University, John F. Kennedy School of Government.
    4. Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2003. "Chapter 11 Technological change and the environment," Handbook of Environmental Economics,in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 11, pages 461-516 Elsevier.
    5. repec:hal:journl:halshs-00261523 is not listed on IDEAS
    6. Samuel Gamtessa & Adugna Olani, 2016. "How Does Energy-Cost Lead to Energy Efficiency? Panel Evidence from Canada," Working Papers 1368, Queen's University, Department of Economics.
    7. Löfgren, Åsa & Millock, Katrin & Nauges, Céline, 2007. "Using Ex Post Data to Estimate the Hurdle Rate of Abatement Investments - An Application to the Swedish Pulp and Paper Industry and Energy Sector," Working Papers in Economics 249, University of Gothenburg, Department of Economics.
    8. Popp, David & Newell, Richard G. & Jaffe, Adam B., 2010. "Energy, the Environment, and Technological Change," Handbook of the Economics of Innovation, Elsevier.
    9. Pizer, William & Kopp, Raymond & Morgenstern, Richard & Harrington, Winston & Shih, Jhih-Shyang, 2002. "Technology Adoption and Aggregate Energy Efficiency," Discussion Papers dp-02-52, Resources For the Future.
    10. Kander, Astrid & Schon, Lennart, 2007. "The energy-capital relation--Sweden 1870-2000," Structural Change and Economic Dynamics, Elsevier, vol. 18(3), pages 291-305, September.
    11. Adam Jaffe & Richard Newell & Robert Stavins, 2002. "Environmental Policy and Technological Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(1), pages 41-70, June.
    12. Schumacher, Katja & Sands, Ronald D., 2007. "Where are the industrial technologies in energy-economy models? An innovative CGE approach for steel production in Germany," Energy Economics, Elsevier, vol. 29(4), pages 799-825, July.
    13. repec:hal:journl:halshs-00343702 is not listed on IDEAS
    14. repec:eee:eneeco:v:72:y:2018:i:c:p:650-666 is not listed on IDEAS
    15. Georgina Moreno & David Sunding, 2001. "Factor Price Risk and the Diffusion of Conservation Technology: Evidence from the Water Industry," Claremont Colleges Working Papers 2001-36, Claremont Colleges.

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    JEL classification:

    • F0 - International Economics - - General

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