Measuring the Energy Input Substitution and Output Effects of Energy Price Changes and the Implications for the Environment

Akin Sharimakin

doi:10.1016/j.enpol.2019.110919

Measuring the Energy Input Substitution and Output Effects of Energy Price Changes and the Implications for the Environment

Akin Sharimakin

School of Economics, Finance and Accounting

Research output: Contribution to journal › Article › peer-review

9 Citations (Scopus)

107 Downloads (Pure)

Abstract

Previous studies of decomposition of factor inputs have limited their analysis on the estimation of substitution and output effects. However, this paper develops a two-step approach to estimate the substitution and output effects of changes in energy demand resulting from changes in prices and further examines the implications of these effects on CO ₂ emissions using European industrial dataset over the period 1995–2007. In our empirical estimations, instead of relying only on iSUR model like previous studies, we introduced a multilevel model, which is a more befitting model to our data. Our analysis covers industry as a whole and for different sector types. The primary results emerged from our analysis suggest a strong evidence using the multilevel model. Generally, our results show that production inputs are substitutable. We find the substitution and output effects to be negatively related to CO ₂ emissions, however, the substitution effects dominate. From policy perspectives, our results suggest that output adjustments may not play a significant role in reducing emissions. We find the overall effects of changes in energy demand to be moderate. Then, we argue that increment in energy taxes should be complemented by cleaner factor substitution and sustainable growth to achieve a desirable carbon reduction.

Original language	English
Article number	110919
Journal	Energy Policy
Volume	133
Early online date	7 Aug 2019
DOIs	https://doi.org/10.1016/j.enpol.2019.110919
Publication status	Published - 1 Oct 2019

Bibliographical note

NOTICE: this is the author’s version of a work that was accepted for publication in Energy Policy. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Energy Policy, 133, (2019) DOI: 10.1016/j.enpol.2019.110919

© 2019, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/10.1016/j.enpol.2019.110919

Keywords

Carbon emissions
Decomposition effects
European industries
Substitution elasticities

ASJC Scopus subject areas

Energy(all)
Management, Monitoring, Policy and Law

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

Access to Document

10.1016/j.enpol.2019.110919

Post-PrintAccepted author manuscript, 894 KBLicence: CC BY-NC-ND

Cite this

@article{1ab19cb381754334be59092632a7afac,

title = "Measuring the Energy Input Substitution and Output Effects of Energy Price Changes and the Implications for the Environment",

abstract = "Previous studies of decomposition of factor inputs have limited their analysis on the estimation of substitution and output effects. However, this paper develops a two-step approach to estimate the substitution and output effects of changes in energy demand resulting from changes in prices and further examines the implications of these effects on CO 2 emissions using European industrial dataset over the period 1995–2007. In our empirical estimations, instead of relying only on iSUR model like previous studies, we introduced a multilevel model, which is a more befitting model to our data. Our analysis covers industry as a whole and for different sector types. The primary results emerged from our analysis suggest a strong evidence using the multilevel model. Generally, our results show that production inputs are substitutable. We find the substitution and output effects to be negatively related to CO 2 emissions, however, the substitution effects dominate. From policy perspectives, our results suggest that output adjustments may not play a significant role in reducing emissions. We find the overall effects of changes in energy demand to be moderate. Then, we argue that increment in energy taxes should be complemented by cleaner factor substitution and sustainable growth to achieve a desirable carbon reduction. ",

keywords = "Carbon emissions, Decomposition effects, European industries, Substitution elasticities",

author = "Akin Sharimakin",

note = "NOTICE: this is the author{\textquoteright}s version of a work that was accepted for publication in Energy Policy. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Energy Policy, 133, (2019) DOI: 10.1016/j.enpol.2019.110919 {\textcopyright} 2019, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/10.1016/j.enpol.2019.110919 ",

year = "2019",

month = oct,

day = "1",

doi = "10.1016/j.enpol.2019.110919",

language = "English",

volume = "133",

journal = "Energy Policy",

issn = "0301-4215",

publisher = "Elsevier",

}

TY - JOUR

T1 - Measuring the Energy Input Substitution and Output Effects of Energy Price Changes and the Implications for the Environment

AU - Sharimakin, Akin

N1 - NOTICE: this is the author’s version of a work that was accepted for publication in Energy Policy. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Energy Policy, 133, (2019) DOI: 10.1016/j.enpol.2019.110919 © 2019, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/10.1016/j.enpol.2019.110919

PY - 2019/10/1

Y1 - 2019/10/1

N2 - Previous studies of decomposition of factor inputs have limited their analysis on the estimation of substitution and output effects. However, this paper develops a two-step approach to estimate the substitution and output effects of changes in energy demand resulting from changes in prices and further examines the implications of these effects on CO 2 emissions using European industrial dataset over the period 1995–2007. In our empirical estimations, instead of relying only on iSUR model like previous studies, we introduced a multilevel model, which is a more befitting model to our data. Our analysis covers industry as a whole and for different sector types. The primary results emerged from our analysis suggest a strong evidence using the multilevel model. Generally, our results show that production inputs are substitutable. We find the substitution and output effects to be negatively related to CO 2 emissions, however, the substitution effects dominate. From policy perspectives, our results suggest that output adjustments may not play a significant role in reducing emissions. We find the overall effects of changes in energy demand to be moderate. Then, we argue that increment in energy taxes should be complemented by cleaner factor substitution and sustainable growth to achieve a desirable carbon reduction.

AB - Previous studies of decomposition of factor inputs have limited their analysis on the estimation of substitution and output effects. However, this paper develops a two-step approach to estimate the substitution and output effects of changes in energy demand resulting from changes in prices and further examines the implications of these effects on CO 2 emissions using European industrial dataset over the period 1995–2007. In our empirical estimations, instead of relying only on iSUR model like previous studies, we introduced a multilevel model, which is a more befitting model to our data. Our analysis covers industry as a whole and for different sector types. The primary results emerged from our analysis suggest a strong evidence using the multilevel model. Generally, our results show that production inputs are substitutable. We find the substitution and output effects to be negatively related to CO 2 emissions, however, the substitution effects dominate. From policy perspectives, our results suggest that output adjustments may not play a significant role in reducing emissions. We find the overall effects of changes in energy demand to be moderate. Then, we argue that increment in energy taxes should be complemented by cleaner factor substitution and sustainable growth to achieve a desirable carbon reduction.

KW - Carbon emissions

KW - Decomposition effects

KW - European industries

KW - Substitution elasticities

UR - http://www.scopus.com/inward/record.url?scp=85070216268&partnerID=8YFLogxK

U2 - 10.1016/j.enpol.2019.110919

DO - 10.1016/j.enpol.2019.110919

M3 - Article

SN - 0301-4215

VL - 133

JO - Energy Policy

JF - Energy Policy

M1 - 110919

ER -

Measuring the Energy Input Substitution and Output Effects of Energy Price Changes and the Implications for the Environment

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

UN SDGs

Access to Document

Other files and links

Fingerprint

Cite this