EJ-17-204 - accepted version.pdf (632.13 kB)
Carbon tax and energy intensity: assessing the channels of impact using UK microdata
journal contribution
posted on 2019-09-30, 14:00 authored by Morakinyo Adetutu, Kayode OdusanyaKayode Odusanya, Tom Weyman-JonesPrior empirical studies indicate that carbon taxes have a negative impact on energy intensity,
yet, the literature is unable to shed much light on the channels through which a moderate carbon
tax reduces industrial energy intensity. Using a two-stage econometric approach, we provide
the first comprehensive analysis of the five components of the energy intensity gain (EIG)
arising from the UK climate change levy (CCL). First, we propose an EIG decomposition based
on a stochastic energy cost frontier and a confidential panel of UK manufacturing plants
covering 2001-2006. In the second stage, we identify the impact of the CCL on EIG
components using an instrumental variable (IV) approach that addresses the endogeneity of the
carbon tax rules. Factor substitution and technological progress are the dominant firm
responses to the CCL, while energy efficiency is surprisingly the least responsive component.
Our findings underscore the challenge arising from overreliance on narrow energy policy
objectives such as energy efficiency improvements, suggesting that a broader policy approach
aimed at improving overall firm resource allocation might be more appropriate.
History
School
- Business and Economics
Department
- Business
Published in
Energy JournalVolume
41Issue
2Pages
143 - 166Publisher
International Association for Energy EconomicsVersion
- AM (Accepted Manuscript)
Rights holder
© The AuthorsPublisher statement
This paper was accepted for publication in the journal Energy Journal and the definitive published version is available at https://doi.org/10.5547/01956574.41.2.made.Acceptance date
2019-09-23Publication date
2020-04-01Copyright date
2020ISSN
0195-6574eISSN
1944-9089Publisher version
Language
- en
Depositor
Mr Kayode OdusanyaUsage metrics
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