On Interfuel Substitution : Some International Evidence

56 Pages Posted: 20 Apr 2016

See all articles by Apostolos Serletis

Apostolos Serletis

University of Calgary - Department of Economics

Govinda R. Timilsina

World Bank - Development Research Group (DECRG)

Olexandr Vasetsky

affiliation not provided to SSRN

Date Written: August 1, 2009

Abstract

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.

Keywords: Energy Production and Transportation, Environment and Energy Efficiency, Energy and Environment, Energy Demand, Markets and Market Access

Suggested Citation

Serletis, Apostolos and Timilsina, Govinda R. and Vasetsky, Olexandr, On Interfuel Substitution : Some International Evidence (August 1, 2009). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2009. Available at SSRN: https://ssrn.com/abstract=1462025

Apostolos Serletis (Contact Author)

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
403 220-4091 (Phone)
403 282-5262 (Fax)

Govinda R. Timilsina

World Bank - Development Research Group (DECRG) ( email )

1818 H Street NW
MSN3-311
Washington, DC 20433
United States

Olexandr Vasetsky

affiliation not provided to SSRN

No Address Available

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