Now showing 1 - 2 of 2
  • Publication
    Capital-Energy Substitution: Evidence from a Panel of Irish Manufacturing Firms
    (Economic and Social Research Institute, 2014-09-18) ;
    Using firm-level data from the Irish Census of Industrial Production for the period from 1991-2009, we look at how Irish manufacturing firms adjust their input mix in response to changing energy prices. We find that an increase in the price of energy causes the demand for energy inputs to fall, while the demand for capital, material and labour inputs rises. This indicates that the other factors of production are substitutable with energy in the Irish manufacturing sector.
  • Publication
    Firm-level estimates of fuel substitution: an application to carbon pricing
    (University College Dublin. School of Economics, 2015-10) ;
    We estimate partial- and total-fuel substitution elasticities between electricity, gas and oil, using firm-level data. We find that, based on the partial elasticity measure, electricity is the least-responsive fuel to changes in its own price and in the price of other fuels. The total elasticity measure, which adjusts the partial elasticity for changes in aggregate energy demand induced by individual fuel price changes, reveals that the demand for electricity is much more price responsive than the partial elasticity suggests. Our results illustrate the importance of accounting for the feedback effect between interfactor and interfuel substitution elasticities when considering the effectiveness of environmental taxation. We use the estimated elasticities to simulate the impact of a e15/tCO2 carbon tax on average energy-related CO2 emissions. The carbon tax results in a small reduction in CO2 emissions from oil and gas use, but this reduction is partially offset by an increase in emissions due to increased electricity consumption by some firms.