Applied Theory of Energy Substitution in the Southeast: An SUR Approach
Issues on energy have recently dominated the economic decisions of several states across the U.S. economy and states in the southeastern region of U.S. are no exception. Almost all the states in the southeast import virtually all of their fuel resources from the Gulf Coast representing an annual financial diversion of several billions of dollars some of which could be used to develop domestic, alternative energy resources. The focus of this study was to determine the potential substitution between renewable energy and conventional energy forms in the southeast of U.S. We developed a system of factor share equations using translog cost function. The system of equations was estimated using a pooled iterative Non-linear Seemingly Unrelated Regression (SUR) procedure with homogeneity and symmetry restrictions imposed. Findings indicate that factor demands in the southeast energy sector are price inelastic and there is limited substitution potential when energy prices rise in fuel production. The substitution potential of renewable energy for the conventional energy forms is found to be higher than that of other conventional energy forms for renewable except renewable energy for natural gas. The substitution of renewable energy for natural gas is technically infeasible since the elasticity is negative. Since renewable energy has the potential to substitute for other forms of energy besides natural gas, federal and state governments might want to reverse the $10 billion petroleum subsidy versus the current $5 billion for renewable if the target (36 billion gallons of renewable fuel by 2022) set by 2007 Energy Independence Act is to be realized.
|Date of creation:||2011|
|Contact details of provider:|| Web page: http://www.saea.org/|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ags:saea11:98609. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.