Skip to main content
Article
Fuel conserving (and using) production functions
Energy Economics (2008)
  • Harry D. Saunders
Abstract

This article addresses the problem identified in the "Khazzoom-Brookes postulate and neoclassical growth" article, namely that the choice of production function can inadvertently influence measured rebound.

The article compares eight production/cost functions used or potentially useful for exploring how energy efficiency gains affect energy consumption. It shows the practitioner's choice of function can inadvertently pre-determine results, and make recommendations as to which functions are flexible enough to prevent this. We also show pre-selected factor substitution elasticities can similarly pre-determine results. To aid the comparison we decompose the energy consumption “rebound” effect into intensity and output/income effects, which also delivers insight into the mechanisms of rebound. We conclude by recommending practitioners restrict themselves to either the Gallant (Fourier) or the Generalized Leontief/Symmetric Generalized Barnett cost functions as being sufficiently “rebound flexible.” The Translog cost function may be suitable given certain conditions and a particular form of the CES (Solow) function is a possible, but problematic, candidate. Along the way, the article provides a general methodology for similarly examining any arbitrarily-defined constant returns to scale production or cost function.

Keywords
  • Energy efficiency,
  • Fuel efficiency,
  • Rebound,
  • Rebound flexible,
  • Production function,
  • Cost function,
  • Translog,
  • Generalized Barnett,
  • Generalized McFadden,
  • Gallant,
  • Fourier,
  • Generalized Leontief,
  • Cobb–Douglas,
  • CES,
  • Leontief,
  • Conservation,
  • Global warming
Disciplines
Publication Date
2008
Citation Information
Harry D. Saunders. "Fuel conserving (and using) production functions" Energy Economics Vol. 30 Iss. 5 (2008)
Available at: http://works.bepress.com/harry_saunders/11/