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Energy Efficiency

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01.01.2016 | Original Article

Capital-energy substitution in manufacturing for seven OECD countries: learning about potential effects of climate policy and peak oil

verfasst von: Giancarlo Fiorito, Jeroen C. J. M. van den Bergh

Erschienen in: Energy Efficiency | Ausgabe 1/2016

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Abstract

The simultaneous influence of increasing oil scarcity, greenhouse gas control and renewable energy targets will result in a future of sustained energy prices. Whether modern economies can find a smooth path away from fossil fuels is a fundamental socio-economic and political question, which according to standard economics depends to a large extent on the degree of substitution between energy and capital. We study this issue by modelling the manufacturing sector with a translog cost function in seven OECD countries using the EU-KLEMS database for the period 1970–2005. After a literature survey, different production structures accounting for input substitution, returns to scale and technical change are estimated, and substitution elasticities are derived. Our results indicate a general complementarity or weak substitution relationship between energy and capital, suggesting that an increase in energy price, e.g. due to climate policy or scarcer fossil fuels, will likely reduce capital inputs, which might lead to a lower output of manufacturing.

Vorheriger Artikel Applicability, potential and limitations of staff-centred energy conservation initiatives in English hospitals

Nächster Artikel Assessment of energy-saving technologies retrofitted to existing public buildings in China

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When s → 1 the function becomes the Cobb-Douglas. For s → ∞, we obtain the linear (perfect substitutes) function; for s → 0, we get the Leontief (perfect complements) function.

Heady and Dillon (1962) explicitly considered a Taylor series expansion in logarithms using a second-degree polynomial (later called translog) and a square root transformation, which took on as a special case the generalized linear production function introduced by Diewert (1971).

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Titel: Capital-energy substitution in manufacturing for seven OECD countries: learning about potential effects of climate policy and peak oil
verfasst von: Giancarlo Fiorito
Jeroen C. J. M. van den Bergh
Publikationsdatum: 01.01.2016
Verlag: Springer Netherlands
Erschienen in: Energy Efficiency / Ausgabe 1/2016
Print ISSN: 1570-646X
Elektronische ISSN: 1570-6478
DOI: https://doi.org/10.1007/s12053-015-9349-z

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