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Energy Price, Environmental Policy, and Technological Bias

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  • Abbas A. Taheri
  • Rodney Stevenson

Abstract

This paper investigates input biasing characteristics of technology, environmental compliance, and changing energy prices. In particular we wish to investigate whether input biases of technology and environmental compliance are induced by changes in relative fuel prices, or whether there are price induced technology and environmental compliance biases. Using a two-stage optimization, we estimate a truncated third-order translog model by its associated (second order) cost share equations. The model uses two-digit SIC data panel for the period 1974 -1991. We find evidence of significant fuel-saving technological bias, while environmental compliance has been significantly fossilfuel using. The results indicate that technology and environmental compliance biases are, in part, induced by changes in relative fuel prices and such induced biases are mainly fuel saving. Finally, our demand elasticity estimates indicate that industrial demand for most fossil fuels and purchased electricity is significantly price inelastic. Policy implications of these results are also briefly discussed.

Suggested Citation

  • Abbas A. Taheri & Rodney Stevenson, 2002. "Energy Price, Environmental Policy, and Technological Bias," The Energy Journal, , vol. 23(4), pages 85-107, October.
    • Handle: RePEc:sae:enejou:v:23:y:2002:i:4:p:85-107
    DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No4-4
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    References listed on IDEAS

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    1. Gollop, Frank M & Roberts, Mark J, 1983. "Environmental Regulations and Productivity Growth: The Case of Fossil-Fueled Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 654-674, August.
    2. Considine, Timothy J., 1989. "Separability, functional form and regulatory policy in models of interfuel substitution," Energy Economics, Elsevier, vol. 11(2), pages 82-94, April.
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