Efficiency of Source Differentiated Sectoral Energy Demand Accounting for Climate

Saleem Shaik

Chapter 20 in Handbook of Energy Finance:Theories, Practices and Simulations, 2020, pp 467-488 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The duality of cost minimization is utilized to examine the effects of climate change on US source differentiated sectoral energy demands or cost shares from 1970 to 2015 using a transcendental logarithmic cost function. The sectors include commercial, industrial, residential and transportation, while the sources include coal, electricity, natural gas, petroleum and wood & waste. The first-order conditions of cost function provide source differentiated sectoral compensated demand for energy. Second, the efficiency of source differentiated sectoral energy demand is estimated using a random panel stochastic frontier analysis model. The results suggest a differential impact of mean and variance of upside and downside precipitation and temperature risk on source differentiated energy demand. The efficiency of source differentiated sectoral energy demand ranges from 43% to 98%.

Keywords: Energy Finance; Financial and Economic Modeling; Volatility; Forecasting; Quantitative Finance; Energy Markets (search for similar items in EconPapers)
JEL-codes: G20 G32 Q40 (search for similar items in EconPapers)
Date: 2020
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