Exploring the output effects on price-induced interfuel substitution and carbon dioxide emission

IF 13.6 2区经济学 Q1 ECONOMICS

Energy Economics Pub Date : 2025-02-03 DOI:10.1016/j.eneco.2025.108277

Hyonyong Kang , Dong Hee Suh

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Abstract

This study explores how output effects influence price-induced interfuel substitution and examines its impact on CO2 emissions in the Korean industrial sector. Employing the differential fuel allocation model, which incorporates output supply decisions, we decompose the price response of energy demand to identify both substitution and output effects and simulate the resulting price-induced CO2 emissions. The results provide empirical evidence of substitutable relationships among coal, oil, and electricity, particularly showing that electrification helps substitute for coal and oil. In addition, the decomposition results reveal that the output effects strengthen own-price response but weaken cross-price response, reflecting the industrial sector's tendency to adjust output supply in response to cost pressures from rising energy prices, especially oil prices. Regarding price-induced CO2 emissions, the simulation results suggest the possibility of over- or under-estimating changes in net CO2 emissions if the output effects are not considered. Notably, they reveal that a rise in oil and gas prices can lead to a reduction in net CO2 emissions due to the output effects.

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来源期刊

Energy Economics ECONOMICS-

CiteScore

18.60

自引率

12.50%

发文量

524

期刊介绍： Energy Economics is a field journal that focuses on energy economics and energy finance. It covers various themes including the exploitation, conversion, and use of energy, markets for energy commodities and derivatives, regulation and taxation, forecasting, environment and climate, international trade, development, and monetary policy. The journal welcomes contributions that utilize diverse methods such as experiments, surveys, econometrics, decomposition, simulation models, equilibrium models, optimization models, and analytical models. It publishes a combination of papers employing different methods to explore a wide range of topics. The journal's replication policy encourages the submission of replication studies, wherein researchers reproduce and extend the key results of original studies while explaining any differences. Energy Economics is indexed and abstracted in several databases including Environmental Abstracts, Fuel and Energy Abstracts, Social Sciences Citation Index, GEOBASE, Social & Behavioral Sciences, Journal of Economic Literature, INSPEC, and more.