Umeå Economic Studies, Department of Economics, Umeå University
No 550:
A Dynamic Analysis of Interfuel Substitution for Swedish Heating Plants
Runar Brännlund ()
and Tommy Lundgren ()
Abstract: This paper estimates a dynamic model of interfuel
substitution for Swedish heating plants. We use the cost share linear logit
model developed by Considine and Mount (1984). All estimated own-price
elasticities are negative and all cross-price elasticities are positive.
The estimated dynamic adjustment rate parameter is small, however
increasing with the size of the plant and time, indicating fast adjustments
in the fuel mix when changing relative fuel prices. The estimated model is
used to illustrate the effects of two different policy changes.
Keywords: Interfuel substitution; linear-logit; biofuel; wood fuel; adjustment cost; (follow links to similar papers)
JEL-Codes: D21; Q41; Q42; (follow links to similar papers)
26 pages, January 11, 2001
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