December 13, 2010

Interfuel Substitution and Energy Use in the UK Manufacturing Sector

by Jevgenijs Steinbuks

- This paper investigates interfuel substitution in the UK manufacturing sector. Econometric models of interfuel substitution are applied to energy inputs aggregated by their energy use, and separately for thermal heating processes, where interfuel substitution is technologically feasible. Compared to aggregate data, estimated own-price fuel demand elasticities for all fuels and cross-price elasticities for fossil fuels are considerably higher for thermal heating processes. Nonetheless, electricity is found to be a poor substitute for other fuels based on both aggregate data and separately for the heating process.

Steinbuks, J. (2010). "Interfuel Substitution and Energy Use in the UK Manufacturing Sector." EPRG Working Paper 1015, May 2010.