Transcript The importance of energy quality in energy intensive

The importance of energy quality in
energy intensive manufacturing:
Evidence from panel cointegration
and panel FMOLS
Brant Liddle
Centre for Strategic Economic Studies
Victoria University
Australia
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)
Data
• IEA Energy Balances
– Energy consumption
– Energy prices
• OECD Structural Analysis Database (STAN)
– Value added
– Labor employed
– Physical capital (gross fixed capital formation)
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
Manufacturing Energy Intensities
Iron and Steel
Non-ferrous metals
Non-metallic minerals
Chemical and chemical products
Paper, pulp, and printing
Wood and wood products
Food and tobacco
Textile and leather
Transport equipment
Fabricated metal products including machinery
Construction
1.548
0.672
0.438
0.344
0.268
0.200
0.123
0.099
0.044
0.034
0.014
Chemicals
Australia
Austria
Belgium
Denmark
Finland
France
Germany
Hungary
Italy
Japan
Korea
Poland
Portugal
Spain
Sweden
Switzerland
UK
USA
3.9%
6.4%
17.6%
9.9%
5.6%
9.1%
9.4%
7.9%
6.1%
6.8%
8.0%
5.4%
4.6%
8.1%
10.7%
17.0%
8.7%
9.7%
OECD
9.4%
Iron &
steel
2.2%
4.8%
5.3%
0.5%
3.9%
2.5%
2.8%
1.3%
2.3%
5.8%
8.3%
2.0%
1.5%
3.7%
3.7%
Non-ferrous
metals
3.4%
1.8%
1.4%
0.3%
1.1%
0.9%
1.3%
1.3%
0.8%
1.7%
1.5%
0.5%
0.7%
1.4%
1.1%
Pulp &
paper
7.0%
7.0%
6.6%
6.5%
15.4%
7.1%
6.3%
4.4%
5.4%
6.7%
3.8%
5.7%
8.0%
8.0%
10.0%
6.8%
10.1%
11.5%
Total for 5
0.7%
1.0%
Non-metallic
minerals
2.6%
5.2%
4.5%
3.0%
3.1%
4.4%
2.7%
3.5%
5.2%
2.6%
3.2%
4.7%
9.4%
7.2%
1.8%
2.3%
2.8%
2.5%
1.0%
1.7%
3.0%
1.2%
3.7%
7.6%
23.5%
19.1%
25.3%
35.4%
20.3%
29.2%
24.0%
22.5%
18.3%
19.9%
23.5%
24.7%
18.3%
24.1%
28.5%
27.4%
26.1%
23.3%
26.4%

Models



VAi ,t  Ki ,t Ei ,t Li ,t





VAi ,t  Ki ,t EQi ,t Li ,t

lnVAi,t  ai  bt   ln Ki,t   ln Ei,t   ln Li,t   i,t
lnVAi,t  ai  bt   ln Ki,t   ln EQi,t   ln Li,t   i,t
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)
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 Grangercaused GDP
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
Ratio of Energy Quality to
Conventional Energy Consumption
1.4
1.3
1.2
Iron & steel
Pulp & paper
1.1
Non-ferrous metals
Chemicals
1
Non-metallic minerals
0.9
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
0.8
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
Panel
Chemicals
Iron & steel
Non-ferrous metals
Non-metallic minerals
Pulp & paper
Variable
E
Coefficient
0.0367**
Variable
EQ
Coefficient
0.190***
K
0.163***
K
0.171***
L
0.696***
L
0.549***
E
-0.062
EQ
0.343*
K
0.042
K
0.101*
L
0.143***
L
0.241***
E
0.316
EQ
0.568***
K
0.043
K
0.074**
L
1.307***
L
0.516***
E
0.063***
EQ
0.197***
K
0.207***
K
0.240***
L
0.484***
L
0.215***
E
0.0098***
EQ
0.301***
K
0.235***
K
0.239***
L
0.174***
L
0.251***
Panel
Chemicals
Iron & steel
Non-ferrous metals
Non-metallic minerals
Pulp & paper
Variable
Coefficient
Variable
Coefficient
E
0.0367**
EQ
0.190***
K
0.163***
K
0.171***
L
0.696***
L
0.549***
E
-0.062
EQ
0.343*
K
0.042
K
0.101*
L
0.143***
L
0.241***
E
0.316
EQ
0.568***
K
0.043
K
0.074**
L
1.307***
L
0.516***
E
0.063***
EQ
0.197***
K
0.207***
K
0.240***
L
0.484***
L
0.215***
E
0.0098***
EQ
0.301***
K
0.235***
K
0.239***
L
0.174***
L
0.251***
Panel
Chemicals
Iron & steel
Non-ferrous metals
Non-metallic minerals
Pulp & paper
Variable
E
Coefficient
0.0367**
Variable
EQ
Coefficient
0.190***
K
0.163***
K
0.171***
L
0.696***
L
0.549***
E
-0.062
EQ
0.343*
K
0.042
K
0.101*
L
0.143***
L
0.241***
E
0.316
EQ
0.568***
K
0.043
K
0.074**
L
1.307***
L
0.516***
E
0.063***
EQ
0.197***
K
0.207***
K
0.240***
L
0.484***
L
0.215***
E
0.0098***
EQ
0.301***
K
0.235***
K
0.239***
L
0.174***
L
0.251***
Panel
Chemicals
Iron & steel
Non-ferrous
metals
Non-metallic minerals
Pulp & paper
Variable
E
Coefficient
0.0367**
Variable
EQ
Coefficient
0.190***
K
0.163***
K
0.171***
L
0.696***
L
0.549***
E
-0.062
EQ
0.343*
K
0.042
K
0.101*
L
0.143***
L
0.241***
E
0.316
EQ
0.568***
K
0.043
K
0.074**
L
1.307***
L
0.516***
E
0.063***
EQ
0.197***
K
0.207***
K
0.240***
L
0.484***
L
0.215***
E
0.0098***
EQ
0.301***
K
0.235***
K
0.239***
L
0.174***
L
0.251***
Panel
Chemicals
Iron & steel
Non-ferrous metals
Non-metallic
minerals
Pulp & paper
Variable
E
Coefficient
0.0367**
Variable
EQ
Coefficient
0.190***
K
0.163***
K
0.171***
L
0.696***
L
0.549***
E
-0.062
EQ
0.343*
K
0.042
K
0.101*
L
0.143***
L
0.241***
E
0.316
EQ
0.568***
K
0.043
K
0.074**
L
1.307***
L
0.516***
E
0.063***
EQ
0.197***
K
0.207***
K
0.240***
L
0.484***
L
0.215***
E
0.0098***
EQ
0.301***
K
0.235***
K
0.239***
L
0.174***
L
0.251***
Panel
Chemicals
Iron & steel
Non-ferrous metals
Non-metallic minerals
Pulp & paper
Variable
E
Coefficient
0.0367**
Variable
EQ
Coefficient
0.190***
K
0.163***
K
0.171***
L
0.696***
L
0.549***
E
-0.062
EQ
0.343*
K
0.042
K
0.101*
L
0.143***
L
0.241***
E
0.316
EQ
0.568***
K
0.043
K
0.074**
L
1.307***
L
0.516***
E
0.063***
EQ
0.197***
K
0.207***
K
0.240***
L
0.484***
L
0.215***
E
0.0098***
EQ
0.301***
K
0.235***
K
0.239***
L
0.174***
L
0.251***
Panel
Variable
Coefficient
Variable
Coefficient
Chemicals
E
0.0367**
EQ
0.190***
K
0.163***
K
0.171***
L
0.696***
L
0.549***
E
-0.062
EQ
0.343*
K
0.042
K
0.101*
L
0.143***
L
0.241***
E
0.316
EQ
0.568***
K
0.043
K
0.074**
L
1.307***
L
0.516***
E
0.063***
EQ
0.197***
K
0.207***
K
0.240***
L
0.484***
L
0.215***
E
0.0098***
EQ
0.301***
K
0.235***
K
0.239***
L
0.174***
L
0.251***
Iron & steel
Non-ferrous metals
Non-metallic minerals
Pulp & paper
AUT
NOR
ESP
ITA
FRA
CAN
GBR
SWE
NLD
USA
FIN
DNK
BEL
LN(VA/EQ)
Nonmetallic minerals
12
IRE
18
17
16
15
14
13
12
NLD
USA
FIN
CAN
BEL
15
SWE
17
GBR
17
ITA
Pulp & Paper
ESP
18
AUT
16
LN(VA/EQ)
18
DNK
CAN
FIN
SWE
NOR
AUT
USA
FRA
NLD
BEL
ITA
ESP
DNK
LN (VA/EQ)
Energy Quality Productivity
Chemcials
16
15
14
14
13
13
12
Energy Quality Productivity
Iron & Steel
Nonferrous metals
18
18
17
17
16
LN(VA/EQ)
16
LN(VA/EQ)
15
14
15
14
13
12
13
11
12
10
USA
USA
ITA
AUT
BEL
SWE
FIN
NOR
AUT
ITA
BEL
NOR
SWE
FIN
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