International Evidence on Sectoral Interfuel Substitution

This paper estimates interfuel substitution elasticities in selected developing and industrialized economies at the sector level. In doing so, it employs state-of-the-art techniques in microeconometrics, particularly the locally flexible normalized quadratic functional form, and provides evidence co...

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Main Authors:	Serletis, Apostolos, Timilsina, Govinda R., Vasetsky, Olexandr
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Industrial Organization and Macroeconomics: Industrial Structure and Structural Change Industrial Price Indices L160 Energy: Demand and Supply Q410
Online Access:	http://hdl.handle.net/10986/4937

id	okr-10986-4937
recordtype	oai_dc
spelling	okr-10986-49372021-04-23T14:02:20Z International Evidence on Sectoral Interfuel Substitution Serletis, Apostolos Timilsina, Govinda R. Vasetsky, Olexandr Industrial Organization and Macroeconomics: Industrial Structure and Structural Change Industrial Price Indices L160 Energy: Demand and Supply Q410 This paper estimates interfuel substitution elasticities in selected developing and industrialized economies at the sector level. In doing so, it employs state-of-the-art techniques in microeconometrics, particularly the locally flexible normalized quadratic functional form, and provides evidence consistent with neoclassical microeconomic theory. The results indicate that the interfuel substitution elasticities are consistently below unity, revealing the limited ability to substitute between major energy commodities (i.e., coal, oil, gas, and electricity). We find that on average, industrial and residential sectors tend to exhibit higher potential for substitution between energy inputs as compared to the electricity generation and transportation sectors in all countries, with the United States being the only exception. In addition, we find that developed countries demonstrate higher potential for interfuel substitution in their industrial and transportation sectors as compared to the developing economies. The implication is that interfuel substitution depends on the structure of the economy, not the level of economic development. Moreover, higher changes in relative prices are needed than what we have already experienced to induce switching toward a lower carbon economy. 2012-03-30T07:30:28Z 2012-03-30T07:30:28Z 2010 Journal Article Energy Journal 01956574 http://hdl.handle.net/10986/4937 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Industrial Organization and Macroeconomics: Industrial Structure and Structural Change Industrial Price Indices L160 Energy: Demand and Supply Q410
spellingShingle	Industrial Organization and Macroeconomics: Industrial Structure and Structural Change Industrial Price Indices L160 Energy: Demand and Supply Q410 Serletis, Apostolos Timilsina, Govinda R. Vasetsky, Olexandr International Evidence on Sectoral Interfuel Substitution
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	This paper estimates interfuel substitution elasticities in selected developing and industrialized economies at the sector level. In doing so, it employs state-of-the-art techniques in microeconometrics, particularly the locally flexible normalized quadratic functional form, and provides evidence consistent with neoclassical microeconomic theory. The results indicate that the interfuel substitution elasticities are consistently below unity, revealing the limited ability to substitute between major energy commodities (i.e., coal, oil, gas, and electricity). We find that on average, industrial and residential sectors tend to exhibit higher potential for substitution between energy inputs as compared to the electricity generation and transportation sectors in all countries, with the United States being the only exception. In addition, we find that developed countries demonstrate higher potential for interfuel substitution in their industrial and transportation sectors as compared to the developing economies. The implication is that interfuel substitution depends on the structure of the economy, not the level of economic development. Moreover, higher changes in relative prices are needed than what we have already experienced to induce switching toward a lower carbon economy.
format	Journal Article
author	Serletis, Apostolos Timilsina, Govinda R. Vasetsky, Olexandr
author_facet	Serletis, Apostolos Timilsina, Govinda R. Vasetsky, Olexandr
author_sort	Serletis, Apostolos
title	International Evidence on Sectoral Interfuel Substitution
title_short	International Evidence on Sectoral Interfuel Substitution
title_full	International Evidence on Sectoral Interfuel Substitution
title_fullStr	International Evidence on Sectoral Interfuel Substitution
title_full_unstemmed	International Evidence on Sectoral Interfuel Substitution
title_sort	international evidence on sectoral interfuel substitution
publishDate	2012
url	http://hdl.handle.net/10986/4937
_version_	1764393312767180800

International Evidence on Sectoral Interfuel Substitution

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