Three Essays on Energy Economics

Abstract

This dissertation consists of three essays in applied energy economics focusing on interfuel substitution in the electric power industry, the linkages among energy consumption, emissions and economic growth, and the price linkages among biofuel, energy and food. The first chapter estimates substitution under static and dynamic scenarios, examining changes in technology and total factor productivity from 2001 to 2008. Two-stage estimation reveals regional characteristics and underlying elements in fuel and factor choice processes. Substitution varies widely depending on the region, coal technology, capital investment, and R&D activities. The second chapter explores the causal relationship between CO2 emissions, hydrocarbon energy consumption, non-hydrocarbons energy consumption, and economic growth in the US for 1960-2009 with vector error correction modeling techniques, generalized impulse response, and variance decomposition in a multivariate context. The results show strong evidence for unidirectional causal relationship running from hydrocarbon consumption to investment, and weak evidence for bi-directional causality between non-hydrocarbon consumption and investment; uni-directional causality running from CO2, hydrocarbon energy consumption, and population to non-hydrocarbon energy consumption, from hydrocarbon and non-hydrocarbon energy consumption to GDP. The third chapter studies the price transmission system in the U.S. food-ethanol-energy links by capturing the price nonlinearities to examine the price relationships between corn, soybean, wheat, ethanol, oil and gasoline in the latest U.S. ethanol markets by using Exponential Smooth Transition VECM. The results show impacts of the ethanol industry on food prices and energy prices and provide insights for policy makers and economic agents.