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Modelling a sector undergoing structural change: The case of Danish energy supply


  • Klinge Jacobsen, Henrik


This paper examines structural change in the power and heat producing sector (energy supply) and its implications for the economy. An integrated approach is used to describe the interactions between this sector and the rest of the economy. Thus, a very detailed model of the sector for Denmark has been linked to a macroeconometric model of the Danish economy. It is argued that analysing sectors that undergo radical changes, for example, the energy supply sector should be undertaken by using a model that describes the technological and organisational changes in production along with implications for the demand of the produced goods. Environmental priorities and targets for emission reductions are important for defining energy policy in Denmark. As the energy supply sector at present is a major contributor to emissions of CO2 and SO2, knowledge of this sector is vital for reducing these emissions. It is shown that quite substantial emission reductions are possible without encountering a substantial negative impact on the economy. The reduction potential through such economic incentives as fuel taxes is shown to be very sensitive to the technology used at present and in the future. This study also emphasises that the large reduction potential of emissions from the energy supply sector is a one-time gain. Fuel switching and increasing use of wind power cannot be repeated. Scenarios carried out with the combined model show that emission reduction in the energy supply sector will decrease the share of this sector in total emissions remarkably, and that the importance of the sector as a key element in any overall emission reduction strategy will decline.

Suggested Citation

  • Klinge Jacobsen, Henrik, 1998. "Modelling a sector undergoing structural change: The case of Danish energy supply," MPRA Paper 42708, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42708

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    References listed on IDEAS

    1. Kenneth C. Hoffman & Dale W. Jorgenson, 1977. "Economic and Technological Models for Evaluation of Energy Policy," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 444-466, Autumn.
    2. David M. Newbery, 1994. "Restructuring and privatizing electric utilities in Eastern Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 2(3), pages 291-316, September.
    3. Alan Manne & Richard Richels, 1992. "Buying Greenhouse Insurance: The Economic Costs of CO2 Emission Limits," MIT Press Books, The MIT Press, edition 1, volume 1, number 026213280x, January.
    4. Klinge Jacobsen, Henrik & Morthorst, Poul Erik & Nielsen, Lise & Stephensen, Peter, 1996. "Sammenkobling af makro√łkonomiske og teknisk-√łkonomiske modeller for energisektoren. Hybris
      [Integration of bottom-up and top-down models for the energy system: A practical case for Denmark]
      ," MPRA Paper 65676, University Library of Munich, Germany.
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    More about this item


    Energy sector; CO2 emissions; electricity price; technology investment; macroeconomic model;

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy


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