Technical Change, Investment and Energy Intensity

Abstract

Abstract in HTML and technical report in PDF available on the Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change website (http://mit.edu/globalchange/www/).This paper analyzes the role of different components of technical change on energy intensity by applying a Translog variable cost function setting to the new EU KLEMS dataset for 3 selected EU countries (Italy, Finland and Spain). The framework applied represents an accounting of technical change components, comprising autonomous as well as embodied and induced technical change. The inducement of embodied technical change is introduced by an equation for the physical capital stock that is a fixed factor in the short-run. The dataset on capital services and user costs of capital in EUKLEMS enables explaining capital accumulation depending on factor prices. The model can be used for explaining and tracing back the long-run impact of prices and technical change on energy intensity.This paper is based on the EU KLEMS database, which has been funded by the European Commission, Research Directorate General as part of the 6th Framework Programme, Priority 8, “Policy Support and Anticipating Scientific and Technological Needs” (project 502049)