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Industrial energy intensities in the UK: is there a deterministic or stochastic difference among sectors?

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Energy intensities of industrial subsectors differ widely due to differences in the final product and ultimately in the production process. The aim of this article is to assess whether these differences are stochastic or deterministic. The analysis is implemented for a number of British industrial subsectors over the 1970-2004 and 1978-2004 time periods. It turns out that the results of the tests are very influenced by whether one allows for the presence of structural breaks. Only when modelling structural breaks, one can conclude that the evidence in favour of the long-term differences being deterministic outbalances the evidence pointing to their nature being stochastic. This supports the adoption of policy instruments which are applied across productive sectors in a way which is not affected by the short-run evolution of the sectors.

Document Type: Research Article


Affiliations: 1: Cambridge Centre For Climate Change Mitigation Research, Department of Land Economy, University of Cambridge, Cambridge, CB3 9EP, UK,Cyril Sweett, London, United Kingdom 2: Cyril Sweett, London, United Kingdom

Publication date: May 1, 2011

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