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.     

Estimates of energy and non-energy elasticities in selected Asian manufacturing sectors: Policy implications

This paper presents the results of a study of the demand elasticities for energy and non-energy inputs in the food processing and textile industries in Bangladesh, the Philippines and Thailand. Estimates of substitution elasticities in production were derived by fitting data to a translog cost function for the period 1970–1980 for Bangladesh, 1970–1978 for the Philippines, and 1974–1977 for Thailand. The results varied according to the industries studied and across countries. They were compared with those of several developing and industrialized countries, and substitutability among inputs was found to be greater in the manufacturing sector of the developing countries studies than in those of industrialized countries. The generally high elasticities between labour and energy have implications for relative input pricing and use in developing countries.     

Forest biomass and Armington elasticities in Europe

The purpose of this paper is to provide estimated Armington elasticities for selected European countries and for three forest biomass commodities of main interest in many energy models: roundwood, chips & particles and wood residues. The Armington elasticity is based on the assumption that a specific forest biomass commodity is differentiated by its origin. The statistically significant estimated Armington elasticities range from 0.52 for roundwood in Hungary to approximately 4.53 for roundwood in Estonia. On average, the statistically significant Armington elasticity for chips & particles over all countries is 1.7 and for wood residues and roundwood 1.3 and 1.5, respectively. These elasticities can provide benchmark values for simulation models trying to assess trade patterns of forest biomass commodities and energy policy effects for European countries or for the EU as a whole.     

How is demand for natural gas determined across European industrial sectors?

This paper estimates the response of manufacturing sectors’ natural gas demand to price and output changes. The average response to future changes in absolute and relative prices of the manufacturing industry in an OECD country depends on the mix of manufacturing industries, particularly with respect to energy intensity and substitution opportunities in production. We estimate short and long run demand elasticities using a shrinkage estimator, which allows heterogeneous demand responses across industries for each country. Our results show that price and output elasticities are heterogeneous within the same manufacturing sector across countries. Furthermore, an output contraction due to e.g. demand shocks will generally have larger negative effects on gas demand than increases in natural gas prices.     

Modelling fuel demand for different socio-economic groups

The fuel demand literature provides a range of estimates of the long and short-run price and income elasticities of gasoline demand for different countries and states. These estimates can be very useful in predicting the overall impacts of policy approaches designed to reduce fuel consumption and to address concerns of carbon emissions or energy security. However, analysis of policy options based on elasticities that are homogenous across income groups provides no information about the relative distributional burden that may be faced by different sectors of the population. Different responses to the same change in price or income are likely to occur, dependent on both travel needs and income levels. This paper estimates gasoline demand elasticities for different income quintiles in the United States to test for heterogeneity in demand response. Group wise summary consumer expenditure data for 20 years is used to derive the elasticity estimates. The results show that the elasticities do vary across groups and follow a U-pattern from the lowest to the highest income quintile. The lowest income quintile is found to have the largest price elasticity. The lowest and the highest income quintiles appear to be statistically insensitive to any changes in income. The rebound effect also follows the U-pattern, with the highest rebound observed among the wealthiest households. Rural households appear to have lower price elasticity than households in urban areas.     

Electricity consumption forecasting in Italy using linear regression models

The influence of economic and demographic variables on the annual electricity consumption in Italy has been investigated with the intention to develop a long-term consumption forecasting model.The time period considered for the historical data is from 1970 to 2007. Different regression models were developed, using historical electricity consumption, gross domestic product (GDP), gross domestic product per capita (GDP per capita) and population.A first part of the paper considers the estimation of GDP, price and GDP per capita elasticities of domestic and non-domestic electricity consumption. The domestic and non-domestic short run price elasticities are found to be both approximately equal to −0.06, while long run elasticities are equal to −0.24 and −0.09, respectively. On the contrary, the elasticities of GDP and GDP per capita present higher values.In the second part of the paper, different regression models, based on co-integrated or stationary data, are presented. Different statistical tests are employed to check the validity of the proposed models.A comparison with national forecasts, based on complex econometric models, such as Markal-Time, was performed, showing that the developed regressions are congruent with the official projections, with deviations of ±1% for the best case and ±11% for the worst. These deviations are to be considered acceptable in relation to the time span taken into account.     

World crude oil and natural gas: a demand and supply model

This paper examines world markets for crude oil and natural gas over the period 1918–1999; it analyzes the time-series properties of output and prices and estimates demand and supply elasticities during 1918–1973 and 1973–1999. Oil and gas prices were stable during the first period; they became volatile afterwards, reflecting deep changes in the market structure following the oil shock in 1973. Demand price elasticities were too low; however, demand income elasticities were high. Supply price elasticities were also too low. The elasticity estimates help to explain the market power of the oil producers and price volatility in response to shocks, and corroborate elasticity estimates in energy studies.     

Demand for gasoline is more price-inelastic than commonly thought

One of the most frequently examined statistical relationships in energy economics has been the price elasticity of gasoline demand. We conduct a quantitative survey of the estimates of elasticity reported for various countries around the world. Our meta-analysis indicates that the literature suffers from publication selection bias: insignificant or positive estimates of the price elasticity are rarely reported, although implausibly large negative estimates are reported regularly. In consequence, the average published estimates of both short- and long-run elasticities are exaggerated twofold. Using mixed-effects multilevel meta-regression, we show that after correction for publication bias the average long-run elasticity reaches ? 0.31 and the average short-run elasticity only ? 0.09.     

Electricity demand for Sri Lanka: A time series analysis

This study estimates electricity demand functions for Sri Lanka using six econometric techniques. It shows that the preferred specifications differ somewhat and there is a wide range in the long-run price and income elasticities with the estimated long-run income elasticity ranging from 1.0 to 2.0 and the long-run price elasticity from 0 to −0.06. There is also a wide range of estimates of the speed with which consumers would adjust to any disequilibrium, although the estimated impact income elasticities tended to be more in agreement ranging from 1.8 to 2.0. Furthermore, the estimated effect of the underlying energy demand trend varies between the different techniques; ranging from being positive to zero to predominantly negative. Despite these differences, the forecasts generated from the six models up until 2025 do not differ significantly. It is therefore encouraging that the Sri Lanka electricity authorities can have some faith in econometrically estimated models used for forecasting. Nonetheless, by the end of the forecast period in 2025 there is a variation of around 452 MW in the base forecast peak demand that, in relative terms for a small electricity generation system like Sri Lanka's, represents a considerable difference.     

The effects of energy price on energy intensity: evidence from Canadian manufacturing sector

This study provides estimates for the long-run elasticity of energy intensity with respect to energy price in Canadian manufacturing industries. The time-series properties of the data are investigated using panel unit root, and the long-run relationships are ascertained based on panel co-integration tests. Estimation of long-run elasticities is then conducted using panel error correction and panel fully modified ordinary least square (PFMOLS) methods. The estimated long-run elasticity is in the tune of ?0.4 for the overall manufacturing sector, but there is significant variation across the industries.     

Experimentation of a solar adsorption refrigerator in Morocco

For countries with a high potential of solar energy, producing cold using solar energy is a promising way to sustainable development since the energy used is free and not harmful for the environment.This work proposes a solar adsorption refrigerator using the pair activated carbon–methanol, which has been totally built and is under experimental tests in the solar laboratory of the Faculty of Sciences of Rabat, the capital of Morocco with Mediterranean climate.The solar adsorption refrigerator is mainly composed of a collector containing the adsorbent, an evaporator and a condenser. The results show that the refrigerator gives good performance in Rabat. The unit produces cold even in rainy and cloudy days and the temperatures achieved by the unit can be less than −11 °C for days with a very high irradiation. The solar coefficient of performance (COP) (cooling energy/solar energy) ranges between 5% and 8% for an irradiation between 12,000 and 28,000 kJ m⁻² and a daily mean ambient temperature around 20 °C.     

Ethanol plant investment using net present value and real options analyses

A real options analysis of entry–exit decisions for dry-grind corn ethanol plants is conducted to incorporate the impact of rising volatility in market prices. For a large plant, the estimated gross margins (ethanol price less corn price), in current dollars, that induce entry and exit were 0.35 US$ dm⁻³ and 0.03 US$ dm⁻³, respectively; nearly 207% (63%) above (below) their respective net present value estimates. Under baseline conditions, a large operating plant would become mothballed at 0.05 US$ dm⁻³ and reactivate if margins rebounded to 0.17 US$ dm⁻³. Growth in the variability of ethanol margins will lead to delays in new plant investments, as well as exits of currently operating facilities. To the extent that alternative renewable fuel technologies become viable, the model can be easily adapted to estimate and compare the results across alternative bioenergy investments.     

Bio-methanization of energy crops through mono-digestion for continuous production of renewable biogas

The aim of this laboratory-scale study was to investigate the long-term anaerobic fermentation of an extremely sour substrate, an energy crop, for continuous production of methane (CH₄) as a source of renewable energy. The sugar beet silage was used as the mono-substrate, which had a low pH of around 3.3–3.4, without the addition of manure. The mesophilic biogas digester was operated in a hydraulic retention time (HRT) range between 15 and 9.5 days, and an organic loading rate (OLR) range of between 6.33 and 10 g VS l⁻¹ d⁻¹. The highest specific gas production rate (spec. GPR) and CH₄ content were 0.67 l g VS⁻¹ d⁻¹ and 74%, respectively, obtained at an HRT of 9.5 days and OLR of 6.35 g VS l⁻¹ d⁻¹. The digester worked within the neutral pH range as well. Since this substrate lacked the availability of macro and micro nutrients, and the buffering capacity as well, external supplementation was definitely required to provide a stable and efficient operation, as provided using NH₄Cl and KHCO₃ in this case. The findings of this ongoing long-term fermentation of an extremely acidic biomass substrate without manure addition have reflected crucial information about how to appropriately maintain the operational and particularly the environmental parameters in an agricultural biogas plant.     

Overview analysis of bioenergy from livestock manure management in Taiwan

The emissions of greenhouse gases (GHGs) from the livestock manure are becoming significant energy and environmental issues in Taiwan. However, the waste management (i.e., anaerobic digestion) can produce the biogas associated with its composition mostly consisting of methane (CH₄), which is now considered as a renewable energy with emphasis on electricity generation and other energy uses. The objective of this paper was to present an overview analysis of biogas-to-bioenergy in Taiwan, which included five elements: current status of biogas sources and their energy utilizations, potential of biogas (methane) generation from livestock manure management, governmental regulations and policies for promoting biogas, benefits of GHGs (i.e., methane) emission reduction, and research and development status of utilizing livestock manure for biofuel production. In the study, using the livestock population data surveyed by the Council of Agriculture (Taiwan) and the emission factors recommended by the Intergovernmental Panel on Climate Change (IPCC), the potential of methane generation from livestock manure management in Taiwan during the period of 1995–2007 has been estimated to range from 36 to 56 Gg year⁻¹, indicating that the biogas (methane) from swine and dairy cattle is abundant. Based on the characteristics of swine manure, the maximum potential of methane generation could reach to around 400 Gg year⁻¹. With a practical basis of the total swine population (around 4300 thousand heads) from the farm scale of over 1000 heads, a preliminary analysis showed the following benefits: methane reduction of 21.5 Gg year⁻¹, electricity generation of 7.2 × 10⁷ kW-h year⁻¹, equivalent electricity charge saving of 7.2 × 10⁶ US$ year⁻¹, and equivalent carbon dioxide mitigation of 500 Gg year⁻¹.     

Demand for transportation fuels in the oecd: A temporal cross-section specification

The determinates of the demand for transportation fuels interest many researchers and policymakers who are considering various energy plans. This paper uses a random coefficient regression approach to estimate the demand for gasoline, diesel fuel and jet fuel. For these three fuels a flow adjustment specification is assumed and for gasoline demand a stock adjustment model is also estimated. Individual European country data are used as the data because these data contain wide variations in the price variables, due to the different tax structures of the individual countries. These data are averaged across countries and time to produce firm estimates of the price and income elasticities of demand. For gasoline demand the estimates obtained from the European data are compared with estimates made by other researchers for the United States.     

Industrial energy substitution during the 1980s in the Greek economy

Factor substitution in Greek manufacturing during the 1980s is examined, using pooled data in static and dynamic translog expenditure share models. Inputs are capital, labor, electricity and non-electrical energy (liquid, solid, gas). Own-price elasticities for capital and labor are inelastic, but for electricity more elastic (−0.90). Results indicate substitutability among factors in the short run. In the long run, electricity and capital are complements, as are labor and non-electrical energy. Greek manufacturing is predicted to continue decreased consumption of liquid fuels to the year 2000, continuing the electrification begun in the 1970s.     

Performance analysis of non-isothermal solar reactors for methanol decomposition

A procedure for analyzing the performance of non-isothermal solar reactors for methanol decomposition was developed, based on a model of thermal loss from direct steam generation collector and a comprehensive kinetic model of methanol decomposition employing BASF K3-110 catalyst. It was found that catalytic bed temperature tends towards a certain value, which depends on the chemical reaction type, radiation intensity and collector structure mainly. For a beam incidence angle of 0°, system efficiency increases from 56% at a radiation intensity of 400 W m⁻² to almost 58% at a radiation intensity of 1000 W m⁻². For a radiation intensity of 400 W m⁻², beam incidence angle of 20°, absorber length of 10 m, feed temperature of 373 K and ratio of reaction section of 0.9, the mole flow rate of feed in the range of 0.21–0.23 mol s⁻¹ results in a maximum quantity of reacted methanol of 0.146 mol s⁻¹, while a mole flow rate of feed of 0.15 mol s⁻¹ leads to a maximum system efficiency of 54.2%. The research indicates that the pre-heating section should be as short as possible for effective use of solar energy.     

Production and trading of biomass for energy – An overview of the global status

The markets for industrially used biomass for energy purposes are developing rapidly toward being international commodity markets. Determining international traded biomass volumes for energy purposes is difficult, for several reasons, such as challenges regarding the compilation of statistics on the topic. While for some markets (pellets and ethanol) separate overviews exist, no comprehensive statistics and summaries aggregating separate biomass streams are available. The aim of this paper is to summarise trade volumes for various biomasses used for energy and to review the challenges related to measurement of internationally traded volumes of biofuels. International trade of solid and liquid biofuels was estimated to be about 0.9 EJ for 2006. Indirect trade of biofuels thorough trading of industrial roundwood and material byproducts comprises the largest proportion of trading, having a share of about 0.6 EJ. The remaining amount consisted of products that are traded directly for energy purposes, with ethanol, wood pellets, and palm oil being the most important commodities. In 2004–2006, the direct trade of biofuels increased 60%, whereas indirect trade has been almost constant. When compared to current global energy use of biomass (about 50 EJ yr⁻¹) and to the long-term theoretical trading potential between the major regions of the world (80–150 EJ yr⁻¹), the development of international trade of biomass for energy purposes is in its initial stage, but it is expected to continue to grow rapidly.     

An economic analysis and energy use in stake-tomato production in Tokat province of Turkey

The aim of this study is to determine the input–output energy consumption and to make a cost analysis of intermediate type stake-tomato grown in open field in Tokat province of Turkey. The data used in the study were obtained from 98 local tomato growers using a questionnaire. The farms were chosen by random sampling method. The results showed that the amount of energy consumed in stake-tomato production was 96 957.36 MJ ha⁻¹. About 42% of this was generated by diesel oil and 38% from fertilizers and machinery. The input–output ratio was 0.80 and energy productivity was found to be 1.00 kg MJ ha⁻¹. About 76% of the total energy inputs used in stake-tomato production was non-renewable while only about 22% was renewable. These findings reveal that intensive input use in stake-tomato production, especially chemical fertilizers, gives a high tomato yield but also raises some problems like environmental pollution and global warming. Thus, new policies, emphasizing energy consumption without degradation of national resources, should be designed for such farms.     

Residential consumption of gas and electricity in the U.S.: The role of prices and income

We study the residential demand for electricity and gas, working with nationwide household-level data that cover recent years, namely 1997–2007. Our dataset is a mixed panel/multi-year cross-sections of dwellings/households in the 50 largest metropolitan areas in the United States as of 2008. We estimate static and dynamic models of electricity and gas demand. We find strong household response to energy prices, both in the short and long term. From the static models, we get estimates of the own price elasticity of electricity demand in the − 0.860 to − 0.667 range, while the own price elasticity of gas demand is − 0.693 to − 0.566. These results are robust to a variety of checks. Contrary to earlier literature (Metcalf and Hassett, 1999; Reiss and White, 2005), we find no evidence of significantly different elasticities across households with electric and gas heat. The price elasticity of electricity demand declines with income, but the magnitude of this effect is small. These results are in sharp contrast to much of the literature on residential energy consumption in the United States, and with the figures used in current government agency practice. Our results suggest that there might be greater potential for policies which affect energy price than may have been previously appreciated.