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A dynamic analysis of interfuel substitution for Swedish heating plants

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  • Brannlund, Runar
  • Lundgren, Tommy

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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Suggested Citation

  • Brannlund, Runar & Lundgren, Tommy, 2004. "A dynamic analysis of interfuel substitution for Swedish heating plants," Energy Economics, Elsevier, vol. 26(6), pages 961-976, November.
  • Handle: RePEc:eee:eneeco:v:26:y:2004:i:6:p:961-976
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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 250-257, May.
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    7. Brannlund, Runar & Kristrom, Bengt, 2001. "Too hot to handle?: Benefits and costs of stimulating the use of biofuels in the Swedish heating sector," Resource and Energy Economics, Elsevier, vol. 23(4), pages 343-358, October.
    8. Brännlund, Runar & Kriström, Bengt, 1999. "Too Hot to Handle? Benefits and costs of stimulating the use of biofuels in the Swedish Heating Sector," Umeå Economic Studies 518, Umeå University, Department of Economics.
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    11. 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 459-465, October.
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    Cited by:

    1. 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.
    2. 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.
    3. 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).
    4. repec:eee:jbfina:v:85:y:2017:i:c:p:1-14 is not listed on IDEAS
    5. Lundmark, Robert & Olsson, Anna, 2015. "Factor substitution and procurement competition for forest resources in Sweden," International Journal of Production Economics, Elsevier, vol. 169(C), pages 99-109.
    6. Jones, Clifton T., 2014. "The role of biomass in US industrial interfuel substitution," Energy Policy, Elsevier, vol. 69(C), pages 122-126.
    7. 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.
    8. repec:gam:jsusta:v:10:y:2018:i:1:p:139-:d:126107 is not listed on IDEAS
    9. Brännlund, Runar & Lundgren, Tommy, 2005. "Swedish Industry and Kyoto – An Assessment of the Effects of the European CO2 Emission Permit Trading System," Umeå Economic Studies 668, Umeå University, Department of Economics.
    10. 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.
    11. Mikael Linden, Matti Makela, and Jussi Uusivuori, 2013. "Fuel Input Substitution under Tradable Carbon Permits System: Evidence from Finnish Energy Plants 2005-2008," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    12. Brannlund, Runar & Lundgren, Tommy, 2007. "Swedish industry and Kyoto--An assessment of the effects of the European CO2 emission trading system," Energy Policy, Elsevier, vol. 35(9), pages 4749-4762, September.
    13. 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.
    14. Banda, Benjamin M. & Hassan, Rashid M., 2011. "Inter-fuel substitution and dynamic adjustment in input demand: Implications for deforestation and carbon emission in Malawi," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 6(1), March.
    15. Hammar, Henrik & Lundgren, Tommy & Sjöström, Magnus, 2006. "The significance of transport costs in the Swedish forest industry," Working Papers 97, National Institute of Economic Research.

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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