Estimating Energy Substitution Parameters in GTAP-E

Rohan O'Reilly, Lee Humphreys and Siobhan Prendiville

No 333429, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: The production structure of GTAP-E includes an energy and capital composite alongside other factors of production. Both the elasticity of substitution between capital and energy and the elasticities of substitution between different fuel sources are therefore highly important to the output of the model. However, they are by default set to the same value across all sectors and countries. This paper uses OECD panel data from 2005-2016 to estimate elasticities for capital-energy substitution and substitution between the fuel commodities included in the GTAP-E 7 database. Estimates are produced over 32 countries, and for capital-energy substitution over 16 sectors. These estimated parameters are then used in an FTA model, and the results are compared with both the default GTAP-E parameters and less specific estimated values from existing literature. This allows us to determine the magnitude of impact on model output from using statistically estimated parameters, and from using parameters disaggregated by country and sector.

Keywords: Environmental Economics and Policy; Research and Development/Tech Change/Emerging Technologies (search for similar items in EconPapers)
Pages: 12
Date: 2022
New Economics Papers: this item is included in nep-eff, nep-ene, nep-env and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:333429

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