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Substitute or complement? Assessing renewable and nonrenewable energy in OECD countries

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  • Surender Kumar
  • Hidemichi Fujii
  • Shunsuke Managi

Abstract

The elasticity of interfuel substitution between renewable and nonrenewable energy is key to establishing effective climate change policy. This is the first study to estimate the elasticity of substitution between different fossil fuels and renewable resources. We used 12 manufacturing industry-level datasets for the OECD countries from 1995 to 2009. We found a complementary relationship from nonrenewable energy to renewable energy in eight industries, whereas a substitute relationship was maintained for four industries. In particular, the food and pulp industries had a strong complementary relationship.

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  • Surender Kumar & Hidemichi Fujii & Shunsuke Managi, 2015. "Substitute or complement? Assessing renewable and nonrenewable energy in OECD countries," Applied Economics, Taylor & Francis Journals, vol. 47(14), pages 1438-1459, March.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:14:p:1438-1459
    DOI: 10.1080/00036846.2014.997922
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    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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