On Interfuel Substitution : Some International Evidence
This paper estimates interfuel substitution elasticities in selected developing and industrialized economies at the national and sector levels. In doing so, it employs state-of-the-art techniques in microeconometrics, particularly the locally flexi...
| Main Authors: | , , |
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| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090831140422 http://hdl.handle.net/10986/4226 |
| Summary: | This paper estimates interfuel
substitution elasticities in selected developing and
industrialized economies at the national and sector levels.
In doing so, it employs state-of-the-art techniques in
microeconometrics, particularly the locally flexible
normalized quadratic functional forms, 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). While
the study finds some evidences of larger interfuel
substitution potential in high-income economies as compared
to that in the middle- and low-income economies in the
industrial and transportation sectors, no such evidence is
observed in the residential and electricity generation
sectors or at the national level. The implication is that
interfuel substitution depends on the structure of the
economy, not the level of economic development. Moreover, a
higher change in relative prices is needed to induce
switching toward a lower carbon economy. |
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