Energy Substitution Potential in China’s Non-metallic Mineral Products Industry-based on the Translog Function and Corrected Formula for Elasticity

Abstract

The non-metallic mineral products industry (NMMPI) of China is the largest in the world and has a character of low energy efficiency, which made this sector energy-intensive and therefore one of leading contributors to CO2 and other pollutants. Therefore, researchers have been paying more and more attentions to the degree of non-energy factors substituting for energy, which is regarded as the most effective measure to address this issue. This study applying the transcendental logarithmic (translog) production function model to investigate the potential of substitution towards energy conservation among production factors in the Chinese NMMPI. Ridge regression is used to estimate the model parameters. Output elasticity and substitution elasticity are calculated. Results show that: during the period 2000-2016, there is significant substitution relationship between energy and capital as well as labor. The elasticities of substitution between energy and capital as well as labor are 1.018 and 1.019, respectively. So, it is possible for the Chinese government to allocate more capital or labor through upgrading technology or implementing policy to realize the CO2 mitigation purpose in the NMMPI. The results of scenario analysis indicate that both capital and labor factors inputs can substitute energy input effectively. In comparison, the substitution effect of labor factor is more obvious.

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Author Information
Xuguang Wang, China University of Geosciences, China
Liang Yan, China University of Geosciences (Wuhan), China
Xiaoguang Zhao, Northwest Engineering Corporation Ltd. of Powerchina, China
Haroon Qasim, China University of Geosciences, China

• Category: Environmental Sustainability & Environmental Management: Atmosphere and Air

Posted by James Alexander Gordon

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