Brant Liddle Centre for Strategic Economic Studies Victoria University Australia
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Transcript of Brant Liddle Centre for Strategic Economic Studies Victoria University Australia
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The importance of energy quality in energy intensive manufacturing: Evidence from panel cointegration and panel FMOLS
Brant LiddleCentre for Strategic Economic Studies
Victoria UniversityAustralia
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Overview
• Use panel cointegration & Pedroni FMOLS to analyze C-D production function (VA, L, K, E)
• Consider disaggregated data (ISIC-two digit)– Chemicals– Iron & steel– Nonferrous metals– Nonmetallic minerals– Pulp & paper
• Consider quality weighted index of energy consumption– Stern (1993 & 2000), Oh & Lee (2004)
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Data
• IEA Energy Balances– Energy consumption– Energy prices
• OECD Structural Analysis Database (STAN)– Value added– Labor employed– Physical capital (gross fixed capital formation)
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Panels
• Chemicals– 11 countries, 1990-2006
• Iron & steel– 7 countries, 1980-2006
• Nonferrous metals– 6 countries, 1980-2006
• Nonmetallic minerals– 11 countries, 1980-2006
• Pulp & paper– 12 countries, 1978-2007
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Manufacturing Energy IntensitiesIron and Steel 1.548Non-ferrous metals 0.672Non-metallic minerals 0.438Chemical and chemical products 0.344Paper, pulp, and printing 0.268Wood and wood products 0.200Food and tobacco 0.123Textile and leather 0.099Transport equipment 0.044Fabricated metal products including machinery 0.034Construction 0.014
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Chemicals Iron & steel
Non-ferrous metals
Non-metallic minerals
Pulp & paper
Total for 5
Australia 3.9% 2.2% 3.4% 2.6% 7.0% 19.1%Austria 6.4% 4.8% 1.8% 5.2% 7.0% 25.3%Belgium 17.6% 5.3% 1.4% 4.5% 6.6% 35.4%Denmark 9.9% 0.5% 0.3% 3.0% 6.5% 20.3%Finland 5.6% 3.9% 1.1% 3.1% 15.4% 29.2%France 9.1% 2.5% 0.9% 4.4% 7.1% 24.0%Germany 9.4% 2.8% 1.3% 2.7% 6.3% 22.5%Hungary 7.9% 1.3% 1.3% 3.5% 4.4% 18.3%Italy 6.1% 2.3% 0.8% 5.2% 5.4% 19.9%Japan 6.8% 5.8% 1.7% 2.6% 6.7% 23.5%Korea 8.0% 8.3% 1.5% 3.2% 3.8% 24.7%Poland 5.4% 2.0% 0.5% 4.7% 5.7% 18.3%Portugal 4.6% 1.5% 0.7% 9.4% 8.0% 24.1%Spain 8.1% 3.7% 1.4% 7.2% 8.0% 28.5%Sweden 10.7% 3.7% 1.1% 1.8% 10.0% 27.4%Switzerland 17.0% 2.3% 6.8% 26.1%UK 8.7% 1.0% 0.7% 2.8% 10.1% 23.3%USA 9.7% 1.7% 1.0% 2.5% 11.5% 26.4%
OECD 9.4% 3.0% 1.2% 3.7% 7.6% 23.5%
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Models
titititi LEKVA ,,,,
titititi LEQKVA ,,,,
titititititi LEKbaVA ,,,,, lnlnlnln
titititititi LEQKbaVA ,,,,, lnlnlnln
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Energy Quality
• Some forms of energy produce more work than others– Electricity > Oil > Natural gas > Coal
• Prices of the different forms tend to reflect that difference in quality (Berndt 1978)
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Energy Quality
• Stern (1993): “quality weighted final energy use … is likely to be a superior measure of the energy input to economic activity as it will reflect better the productivity of the uses to which energy is put.”
• Stern (1993) found for US– Energy quality weighted consumption Granger-
caused GDP
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Measuring Energy Quality
• Logged differences weighted by expenditure shares• P: prices & E: quantities consumed of fuels i• Electricity, oil, natural gas, coal, & combustible
renewables and waste
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Ratio of Energy Quality to Conventional Energy Consumption
19781979
19801981
19821983
19841985
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20080.8
0.9
1
1.1
1.2
1.3
1.4
Iron & steelPulp & paperNon-ferrous metalsChemicalsNon-metallic minerals
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Methods
• Panel unit root tests– ADF-Fisher– Pesaran
• For all sectors all variables are panel I(1)• Pedroni panel cointegration test• For all sectors variables are panel cointegrated• Long-run elasticities estimated from Pedroni
panel FMOLS
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Panel Variable Coefficient Variable CoefficientChemicals E 0.0367** EQ 0.190***
K 0.163*** K 0.171***
L 0.696*** L 0.549***
Iron & steel E -0.062 EQ 0.343*
K 0.042 K 0.101*
L 0.143*** L 0.241***
Non-ferrous metals E 0.316 EQ 0.568***
K 0.043 K 0.074**
L 1.307*** L 0.516***
Non-metallic minerals E 0.063*** EQ 0.197***
K 0.207*** K 0.240***
L 0.484*** L 0.215***
Pulp & paper E 0.0098*** EQ 0.301***
K 0.235*** K 0.239***
L 0.174*** L 0.251***
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Panel Variable Coefficient Variable Coefficient
Chemicals E 0.0367** EQ 0.190***
K 0.163*** K 0.171***
L 0.696*** L 0.549***
Iron & steel E -0.062 EQ 0.343*
K 0.042 K 0.101*
L 0.143*** L 0.241***
Non-ferrous metals E 0.316 EQ 0.568***
K 0.043 K 0.074**
L 1.307*** L 0.516***
Non-metallic minerals E 0.063*** EQ 0.197***
K 0.207*** K 0.240***
L 0.484*** L 0.215***
Pulp & paper E 0.0098*** EQ 0.301***
K 0.235*** K 0.239***
L 0.174*** L 0.251***
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Panel Variable Coefficient Variable CoefficientChemicals E 0.0367** EQ 0.190***
K 0.163*** K 0.171***
L 0.696*** L 0.549***
Iron & steel E -0.062 EQ 0.343*
K 0.042 K 0.101*
L 0.143*** L 0.241***
Non-ferrous metals E 0.316 EQ 0.568***
K 0.043 K 0.074**
L 1.307*** L 0.516***
Non-metallic minerals E 0.063*** EQ 0.197***
K 0.207*** K 0.240***
L 0.484*** L 0.215***
Pulp & paper E 0.0098*** EQ 0.301***
K 0.235*** K 0.239***
L 0.174*** L 0.251***
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Panel Variable Coefficient Variable CoefficientChemicals E 0.0367** EQ 0.190***
K 0.163*** K 0.171***
L 0.696*** L 0.549***
Iron & steel E -0.062 EQ 0.343*
K 0.042 K 0.101*
L 0.143*** L 0.241***
Non-ferrous metals
E 0.316 EQ 0.568***
K 0.043 K 0.074**
L 1.307*** L 0.516***
Non-metallic minerals E 0.063*** EQ 0.197***
K 0.207*** K 0.240***
L 0.484*** L 0.215***
Pulp & paper E 0.0098*** EQ 0.301***
K 0.235*** K 0.239***
L 0.174*** L 0.251***
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Panel Variable Coefficient Variable CoefficientChemicals E 0.0367** EQ 0.190***
K 0.163*** K 0.171***
L 0.696*** L 0.549***
Iron & steel E -0.062 EQ 0.343*
K 0.042 K 0.101*
L 0.143*** L 0.241***
Non-ferrous metals E 0.316 EQ 0.568***
K 0.043 K 0.074**
L 1.307*** L 0.516***
Non-metallic minerals
E 0.063*** EQ 0.197***
K 0.207*** K 0.240***
L 0.484*** L 0.215***
Pulp & paper E 0.0098*** EQ 0.301***
K 0.235*** K 0.239***
L 0.174*** L 0.251***
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Panel Variable Coefficient Variable CoefficientChemicals E 0.0367** EQ 0.190***
K 0.163*** K 0.171***
L 0.696*** L 0.549***
Iron & steel E -0.062 EQ 0.343*
K 0.042 K 0.101*
L 0.143*** L 0.241***
Non-ferrous metals E 0.316 EQ 0.568***
K 0.043 K 0.074**
L 1.307*** L 0.516***
Non-metallic minerals E 0.063*** EQ 0.197***
K 0.207*** K 0.240***
L 0.484*** L 0.215***
Pulp & paper E 0.0098*** EQ 0.301***
K 0.235*** K 0.239***
L 0.174*** L 0.251***
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Panel Variable Coefficient Variable CoefficientChemicals E 0.0367** EQ 0.190***
K 0.163*** K 0.171***
L 0.696*** L 0.549***
Iron & steel E -0.062 EQ 0.343*
K 0.042 K 0.101*
L 0.143*** L 0.241***
Non-ferrous metals E 0.316 EQ 0.568***
K 0.043 K 0.074**
L 1.307*** L 0.516***
Non-metallic minerals E 0.063*** EQ 0.197***
K 0.207*** K 0.240***
L 0.484*** L 0.215***
Pulp & paper E 0.0098*** EQ 0.301***
K 0.235*** K 0.239***
L 0.174*** L 0.251***
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DNKES
P ITA BEL NLD FRA
USAAUT
NORSW
EFIN CAN
12
13
14
15
16
17
18
Pulp & Paper
LN (V
A/EQ
)
IREDNK
AUTES
P ITAGBR
SWE
BEL CAN FIN USANLD
12
13
14
15
16
17
18
Chemcials
LN(V
A/EQ
)
AUTES
PFR
AGBR
NLD FIN BEL12
13
14
15
16
17
18
Nonmetallic minerals
LN(V
A/EQ
)
Energy Quality Productivity
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USA ITA AUT BEL SWE FIN NOR10
11
12
13
14
15
16
17
18
Iron & Steel
LN(V
A/EQ
)
USA AUT ITA BEL NOR SWE FIN12
13
14
15
16
17
18Nonferrous metals
LN(V
A/EQ
)
Energy Quality Productivity
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Conclusions• Improvements in energy quality—shift to electricity
important to energy intensive manufacturing– Elasticity of energy quality >> conventionally measured
energy– Importance of energy quality relative to capital & labor
emphasized• Carbon tax’s impact on manufacturing
– Carbon intensity of electricity more important than energy intensity of sector/technology
• More flexible production function– Nonlinear transformation of I(1) terms