Substitution and price elasticity estimates using inter-country pooled data in a translog cost model

Pooled data across several developing countries and the U. S. were used to estimate long-run substitution and price elasticities in a translog framework for the paper, iron and steel, and aggregate manufacturing industries. While the quality of the estimates varies across the several industry-specific models, the results suggest higher values for these elasticities than appear commonly used in integrated assessment models. Estimates of own-price elasticities of energy range from − 0.80 to − 1.76 and are comparable to estimates from previous econometric studies in the context of developed countries (− 0.77 to − 0.87). Substitution elasticities show wider variation across countries and industries. For energy and capital they range from − 1.96 to 9.80, for labor and energy from 2.61 to 7.11, and for energy and material from − 0.26 to 2.07.     

Price elasticities of residential electricity demand: Estimates from household panel data in Bangladesh

We collect a household level panel dataset to estimate the price elasticities of electricity demand for different types of urban households in Bangladesh. We use an instrumental variable estimation strategy which exploits exogenous variation in average electricity prices induced by a value-added-tax shock. The results indicate significant heterogeneity in price elasticities by electricity consumption levels. We conduct a number of simulations under alternative policy scenarios to illustrate how incorporating the heterogeneous nature of price elasticities into pricing policy can help decrease electricity demand-supply mismatch and inequality in electricity consumption. The results have important policy implications for developing countries aiming to address major energy issues by implementing tariff reforms.     

Input substitution in Thailand's manufacturing sector: Implications for energy policy

Input demand and substitution elasticities for five manufacturing sector industries in Thailand are estimated using a three-factor (capital, labour and energy) translog cost function covering the first oil-shock period 1974–1977. In all cases the demand is elastic for energy, close to unity for labour, and inelastic for capital. Capital and energy are always substitutes as are capital and labour. The labour-intensive and comparative- advantage-based industries showed greater responsiveness to energy price changes relative to the capital-intensive and protected industries in the sense that the former two can substitute capital and labour for energy whereas the latter two can substitute only capital.     

Economic growth and energy consumption revisited — Evidence from linear and nonlinear Granger causality

The relationship between energy consumption and economic growth is considered as an imperative issue in energy economics. Previous studies have ignored the nonlinear behavior which could be caused by structural breaks. In this study, both linear and nonlinear Granger causality tests are applied to examine the causal relationship between energy consumption and economic growth for a sample of Asian newly industrialized countries as well as the U.S. This study finds evidence supporting a neutrality hypothesis for the United States, Thailand, and South Korea. However, empirical evidence on Philippines and Singapore reveals a unidirectional causality running from economic growth to energy consumption while energy consumption may have affected economic growth for Taiwan, Hong Kong, Malaysia and Indonesia. Policy implications are also discussed.     

Production functions for climate policy modeling: An empirical analysis

Quantitative models for climate policy modeling differ in the production structure used and in the sizes of the elasticities of substitution. The empirical foundation for both is generally lacking. This paper estimates the parameters of 2-level CES production functions with capital, labour and energy as inputs, and is the first to systematically compare all nesting structures. Using industry-level data from 12 OECD countries, we find that the nesting structure where capital and labour are combined first, fits the data best, but for most countries and industries we cannot reject that all three inputs can be put into one single nest. These two nesting structures are used by most climate models. However, while several climate policy models use a Cobb–Douglas function for (part of the) production function, we reject elasticities equal to one, in favour of considerably smaller values. Finally we find evidence for factor-specific technological change. With lower elasticities and with factor-specific technological change, some climate policy models may find a bigger effect of endogenous technological change on mitigating the costs of climate policy.     

典型国家工业化进程中能源强度的变化及启示

能源强度是用于比较不同国家或地区经济发展对于能源依赖程度的重要指标。通过对典型国家工业化进程中能源强度变化情况进行深入分析,发现能源强度并非简单与第二产业比重、高耗能产品产量直接关联,而是更多地和工业化的内容、主导产业相关。发展用于城市扩张、基础设施建设的传统工业化会导致能源强度快速上升,而发展高附加值、高端制造业的现代化工业又可以抵消传统工业化对能源强度的拉动作用。我国目前处于传统工业化发展迅速而工业现代化发展不足的状态,同时第三产业发展相对缓慢,因此能源强度上升压力较大。实现能源强度持续下降,有赖于工业化模式的根本性转变和结构上的根本性调整。     

Promoting sustainable energy technology transfers to developing countries through the CDM

The clean development mechanism (CDM) has the objective to support developing countries in achieving a sustainable development path, while at the same time assisting industrialized countries in achieving their Kyoto Protocol commitments. Actual practice shows that CDM technology transfers are largely focused on reducing GHG emissions at lowest cost and less on the domestic development needs and priorities of the host countries. This paper discusses an approach to facilitate low-carbon energy technology transfer compatible with the energy development needs and priorities of developing countries. The results reported here are concerned with the relation between the transfer of low-carbon energy technologies and the perceived needs and priorities for low-carbon technologies in the country context. The study has provided insights on improving the CDM for technology transfer in accordance with host countries’ development priorities and has been applied to Chile, China, Israel, Kenya and Thailand. It forms the first stage of an overall approach for facilitating low-carbon technology transfer under the UNFCCC. The second stage of the study is reported elsewhere [ENTTRANS, 2008. Promoting sustainable energy technology transfers through the CDM: Converting from a theoretical concept to practical action. Final report of specific support action under EU FP-6, January 2006–December 2007. Contract 022673, co-ordination: Foundation JIN, Groningen, The Netherlands, www.enttrans.org].     

Assessing the sustainability challenges for electricity industries in ASEAN newly industrialising countries

Rapid social and economic progress in fast developing countries such that among the countries in the Association of Southeast Asian Nations (ASEAN) have driven substantial growth in electricity consumption in this region. Whilst this represents significant societal and economic development, it has potentially growing adverse environmental impacts. This raises a concern on sustainable development in the electricity sector in this region. This study evaluates key sustainability challenges in the electricity industries in the five largest energy consumers in ASEAN: Indonesia, Thailand, Malaysia, the Philippines and Vietnam. The 3A's energy sustainability objectives: Accessibility, Availability and Acceptability are used as the sustainability analytical framework. This study also draws together a set of associated indicators and criteria within the analytical framework to analyse the status of the electricity industries in these countries. The analysis shows that key sustainability challenges in the ASEAN-5 are attributable to satisfying rapid demand growth; enhancing security of electricity supply; and mitigating the increase in CO₂ emissions from electricity generation. Given the promising resource and technical potential in this region, renewable energy emerges as a favourable option to address these challenges; however, increasing the share of renewable energy in electricity generation requires considerable policy support. This study suggests that there is an opportunity for the ASEAN countries to strengthen regional collaborations through experience and resource sharing to enhance sustainability in the electricity industries. This study also highlights some of the key issues facing the electricity industry, and the need for new generation investment decision support tools which can address these issues.     

Estimating the cost of capital for renewable energy projects

Many models in energy economics assess the cost of alternative power generation technologies. As an input, the models require well-calibrated assumptions for the cost of capital or discount rates to be used, especially for renewable energy for which the cost of capital differs widely across countries and technologies. In this article, we review the spectrum of estimation methods for the private cost of capital for renewable energy projects and discuss appropriate use of the methods to yield unbiased results. We then evaluate the empirical evidence from 46 countries for the period 2009–2017. We find a globally consistent rank order among technologies, with the cost of capital increasing from solar PV to onshore wind to offshore wind power. On average, the cost of capital in developing countries is significantly higher than in industrialized countries, with large heterogeneity also within the groups of industrialized or developing countries.     

Energy policy issues in developing countries Lessons from ASEAN''s experience

This paper reviews the energy policy responses of the five countries originally composing the Association of Southeast Nations (ASEAN) — Indonesia, Malaysia, the Philippines, Singapore, and Thailand — following the first price shocks of 1973–1974. It analyses the implications of the demand and supply management policies adopted, especially those related to pricing and diversification. It calls attention to the implications of these policies for structural changes in industries, including the shift away from energy-intensive to labour-intensive technologies; the role that technological change and technology transfer can play; the role of the transport sector in conservation, and the scope for oil-to-coal switching. It raises policy and research questions on the allocative efficiency of demand and supply management policies.     

The relationship between energy consumption, energy prices and economic growth: time series evidence from Asian developing countries

This paper estimates the causal relationships between energy consumption and income for India, Indonesia, the Philippines and Thailand, using cointegration and error-correction modelling techniques. The results indicate that, in the short-run, unidirectional Granger causality runs from energy to income for India and Indonesia, while bidirectional Granger causality runs from energy to income for Thailand and the Philippines. In the case of Thailand and the Philippines, energy, income and prices are mutually causal. The study results do not support the view that energy and income are neutral with respect to each other, with the exception of Indonesia and India where neutrality is observed in the short-run.     

The embodied energy in trade: What role does specialization play?

Many industrialized countries are net importers of embodied energy and emissions, while many developing countries are net exporters. We examine the role of specialization in driving these trade patterns by conducting a spatial index decomposition analysis on the embodied energy in net exports for 41 economies. The results reveal that industrialized countries have generally offshored energy intensive production, which many developing countries specialize in. We find that specialization, on average, makes the biggest contribution, accounting for roughly 50% of a country's embodied energy in net exports. However, other factors, namely energy intensity and the trade balance, combine to make an equally important contribution. In summary, specialization, despite its significant role, is not the only cause of the embodied energy trade patterns observed between industrialized and developing countries.     

Elasticities,ratios and energy modelling

This paper shows certain pitfalls in calculating elasticities and ratios. By studying some commonly used econometric models of energy, it is then argued that income elasticity could be considered stable both in the short run and in the long run. Lastly, we have derived a formula which clearly relates the income elasticity to the energy–income ratio. The difference of elasticities among the developing and developed countries can be explained directly from the formula.     

Asian renewables: South East Asia regional overview

In the second part of a two-part feature, David Hayes Refocus correspondent continues his review of renewable energy development and potential in Asian countries concluding with the Southeast Asian countries Thailand, Malaysia, The Philippines and Indonesia.     

The energy-GDP relationship in developing countries : Empirical evidence and stability tests

The elasticity of energy consumption with respect to GDP is an important element in projecting energy needs in economic development. This study uses cross section and pooled cross section time series data to find that the elasticity of energy consumption with respect to GDP in developing countries is in the neighbourhood of 1.35, and significantly above one. Over the period covered, 1970 to 1976, the relationships appear to have remained stable. There are significant differences between areas of the world, but the differences in the elasticities between different continents are not large     

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

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.     

A (negative) replication of ‘The relationship between energy consumption,energy prices,and economic growth: Time series evidence from Asian developing countries’ (Energy Economics, 2000)

This paper replicates Asafu-Adjaye (2000) which employs unit root and cointegration tests together with error correction models to investigate the relationships between energy consumption and income for four energy-dependent Asian developing countries using data from 1971 through 1995. This paper finds not only that the results cannot be replicated, but that the results are not robust to alternative estimation procedures that include the simulation of finite sample critical values and the extension to panel unit root, stationarity and cointegration tests which are necessary to improve upon the power properties of the short time series employed by Asafu-Adjaye (2000). The results from the extension of the analysis to more modern time series techniques disprove the original paper's results, with panel cointegration tests finding that the trivariate system (income, energy consumption, and prices) does not follow a long run relationship for India, Indonesia, Thailand, and the Philippines.     

CO2 emissions,energy consumption and economic growth in the ASEAN-5 countries: A cross-sectional dependence approach

We re-examine the relationship between CO2 emissions, energy consumption (EC) and economic growth (GDP) for the five main Association of Southeast Asian Nations (ASEAN-5) countries over the period 1980–2016. Our main contention is that the findings in previous studies that have examined the relationship between CO2, EC and GDP in the ASEAN-5 are biased because they fail to account for cross-sectional dependence (CD). We show that conventional tests applied to our dataset suggest a misleading conclusion about the Environmental Kuznets Curve (EKC) and Granger causal relationship between CO2, EC and GDP in the presence of CD. When we apply a new panel test of Granger non-causality that addresses CD and heterogeneity, we find considerable heterogeneity. We find unidirectional Granger causality running from GDP to CO2 for Malaysia, the Philippines, Singapore and Thailand; unidirectional causality running from GDP to EC in Indonesia, Malaysia and Thailand; unidirectional causality running from EC to GDP in Singapore and bidirectional causality between GDP and EC in the Philippines. We also find support for the EKC hypothesis for the ASEAN-5 countries.     

Energy policies of industrialized countries

The energy and economy scenarios between the end of World War II and the oil crisis of 1973 are critically evaluated. The profound changes produced by the oil crisis of 1973–1974 are noted. An examination is then made, in a historical and economic context, of the energy policies of the Western industrialized countries after 1973. This assessment examines not only the potentials of these policies in satisfying short-to medium-term energy requirements, but also their impact on the basic, longer-term development problems of industrialized and developing countries.     

Modelling the transport sector fuel demand for developng economies

This paper concentrates on the transport sector of six developing countries with similar common denominators, namely Turkey, Thailand, Pakistan, Morocco, Tunisia and Malaysia. By using standard econometric techniques, we analyse the evolution of oil demand for road transport in these countries in relation to independent variables such as income, population, price of gasoline and diesel etc. Unlike the treatment in the present literature on the subject, gasoline and diesel consumption are estimated separately due to the high share of diesel in the total transport sector consumption. On the basis of the estimation over the period 1970–1990, on a country by country basis, we forecast the demand for these six countries until 2010. The results of this study indicate that the transport sector will be the driving force for energy and oil demand as part of economic growth in these developing countries. Its share in the future energy market structure is expected to grow. Consequently, the (pricing) policies of oil products in this sector have a crucial role for shaping rational economic and energy strategies within the framework of rising environmental concern.