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The influence of climate change on the demand for ethanol

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  • Yeboah, Osei
  • Shaik, Saleem

Abstract

The influence of climate change on US corn ethanol energy demand by commercial, industry and transportation is examined from 1970 to 2017 using a Translog cost function. The sectorial compensated demand for energy, price, and pure technical substitution elasticities between the three sectors is computed using parameter coefficients from a system of demand shares equations. The commercial sector price is used to normalize the equations and hold the homogeneity and symmetry conditions. Both the U.S. transportation and industry sectors’ consumption of ethanol as energy are affected by the climatic factors. The transportation sector’s consumption is affected by only the variance of precipitation while that of the industry is affected by both the mean and variance of temperature, and variance of precipitation. All the three sectors have very little flexibility for economic substitution to reduce ethanol use due to very weak technical substitution among sectors except industrial energy for transportation where expenditure is reduced by about 1.3% for a 10% rise in prices. The commercial and industrial sectors’ ethanol demand can only be increased through greater improvement in technology. Feedstock availability, due to high consumptive use water has negative effect on demand.

Suggested Citation

  • Yeboah, Osei & Shaik, Saleem, 2021. "The influence of climate change on the demand for ethanol," Renewable Energy, Elsevier, vol. 164(C), pages 1559-1565.
    • Handle: RePEc:eee:renene:v:164:y:2021:i:c:p:1559-1565
    DOI: 10.1016/j.renene.2020.10.139
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    2. Saring Suhendro & Mega Matalia & Sari Indah Oktanti Sembiring, 2021. "Public Sector Policy of Estimating Model for Renewable Energy," International Journal of Energy Economics and Policy, Econjournals, vol. 11(5), pages 609-613.

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    More about this item

    Keywords

    US ethanol Demand; Translog cost function; Elasticity of substitution; SUR model; U.S. state data; 1970–2017;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

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