The influence of climate change on the demand for ethanol

Osei Yeboah and Saleem Shaik

Renewable Energy, 2021, vol. 164, issue C, 1559-1565

Abstract: The influence of climate change on US corn ethanol energy demand by commercial, industry and transportation is examined from 1970 to 2017 using a Translog cost function. The sectorial compensated demand for energy, price, and pure technical substitution elasticities between the three sectors is computed using parameter coefficients from a system of demand shares equations. The commercial sector price is used to normalize the equations and hold the homogeneity and symmetry conditions. Both the U.S. transportation and industry sectors’ consumption of ethanol as energy are affected by the climatic factors. The transportation sector’s consumption is affected by only the variance of precipitation while that of the industry is affected by both the mean and variance of temperature, and variance of precipitation. All the three sectors have very little flexibility for economic substitution to reduce ethanol use due to very weak technical substitution among sectors except industrial energy for transportation where expenditure is reduced by about 1.3% for a 10% rise in prices. The commercial and industrial sectors’ ethanol demand can only be increased through greater improvement in technology. Feedstock availability, due to high consumptive use water has negative effect on demand.

Keywords: US ethanol Demand; Translog cost function; Elasticity of substitution; SUR model; U.S. state data; 1970–2017 (search for similar items in EconPapers)
JEL-codes: C35 F13 Q17 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:renene:v:164:y:2021:i:c:p:1559-1565

DOI: 10.1016/j.renene.2020.10.139

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