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Interfuel Substitution and Energy Use in the U.K. Manufacturing Sector

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  • Jevgenijs Steinbuks

Abstract

This paper investigates interfuel substitution, separately accounting for different types of energy use in the U.K. manufacturing sector. Econometric models of interfuel substitution are applied to aggregate energy use, as well as to a specific energy use process--thermal heating--where interfuel substitution is technologically feasible. Compared to the aggregate data, the estimated own-price elasticities for all fuels and the cross-price elasticities for fossil fuels are considerably higher for thermal heating processes. Nonetheless, electricity is found to be a poor substitute for other fuels based on both aggregate data and, separately, for the heating process. An increase in real fuel prices from the Climate Change Levy in 2001 resulted in higher substitution elasticities based on aggregate data, and lower substitution elasticities for the thermal heating process. The results of a counterfactual decomposition of change in the estimated elasticities indicate that technological change was the major determinant of the differences in observed elasticities before and after the energy price increase.

Suggested Citation

  • 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).
  • Handle: RePEc:aen:journl:33-1-a01
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    Cited by:

    1. repec:ssi:jouesi:v:1:y:2013:i:1:p:55-66 is not listed on IDEAS
    2. Raul Jimenez & Ariel Yépez-García, 2016. "Composition and Sensitivity of Residential Energy Consumption," IDB Publications (Working Papers) 95257, Inter-American Development Bank.
    3. Considine, Timothy & Manderson, Edward, 2014. "The role of energy conservation and natural gas prices in the costs of achieving California's renewable energy goals," Energy Economics, Elsevier, vol. 44(C), pages 291-301.
    4. Considine, Timothy J. & Manderson, Edward J.M., 2015. "The cost of solar-centric renewable portfolio standards and reducing coal power generation using Arizona as a case study," Energy Economics, Elsevier, vol. 49(C), pages 402-419.
    5. repec:eee:enepol:v:113:y:2018:i:c:p:332-341 is not listed on IDEAS
    6. Papageorgiou, Chris & Saam, Marianne & Schulte, Patrick, 2013. "Elasticity of substitution between clean and dirty energy inputs: A macroeconomic perspective," ZEW Discussion Papers 13-087, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    7. repec:eee:jbfina:v:85:y:2017:i:c:p:1-14 is not listed on IDEAS
    8. Jones, Clifton T., 2014. "The role of biomass in US industrial interfuel substitution," Energy Policy, Elsevier, vol. 69(C), pages 122-126.
    9. 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.
    10. Surender Kumar & Hidemichi Fujii & Shunsuke Managi, 2014. "Substitute or complement? Assessing renewable and non-renewable energy in OCED countries," Working Papers SDES-2014-8, Kochi University of Technology, School of Economics and Management, revised Oct 2014.
    11. KITAMURA Toshihiko & MANAGI Shunsuke, 2016. "Substitution between Purchased Electricity and Fuel for Onsite Power Generation in the Manufacturing Industry: Plant level analysis in Japan," Discussion papers 16007, Research Institute of Economy, Trade and Industry (RIETI).
    12. Steinbuks, Jevgenijs & Neuhoff, Karsten, 2014. "Assessing energy price induced improvements in efficiency of capital in OECD manufacturing industries," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 340-356.
    13. Fujii, Hidemichi & Managi, Shunsuke, 2015. "Economic development and multiple air pollutant emissions from the industrial sector," MPRA Paper 67027, University Library of Munich, Germany.
    14. Timothy J. Considine & Edward J. M. Manderson, 2013. "The Cost of Solar-Centric Renewable Portfolio Standards," The School of Economics Discussion Paper Series 1323, Economics, The University of Manchester.
    15. repec:spr:empeco:v:52:y:2017:i:4:d:10.1007_s00181-016-1112-6 is not listed on IDEAS
    16. Gitana Dudzevičiūtė, 2013. "Lithuanian manufacturing trends in the context of developed and developing countries," Post-Print hal-01694317, HAL.

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    JEL classification:

    • F0 - International Economics - - General

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