Dynamic and static behaviour with respect to energy use and investment of Dutch Greenhouse firms

Dutch greenhouse horticultural firms are energy-intensive and major emitters of greenhouse gases. This paper develops a theoretically consistent model that is able to describe the greenhouse firms` behaviour regarding energy use and investments in energy technology. The behaviour of the firm is modelled using a combination of a dynamic cost function and a static profit function framework. This paper derives the optimal quantity of energy and energy capital from the link between these two functions. The model is applied to a panel of 97 Dutch greenhouse firms over the period 2001-2008. The results show that most Dutch greenhouse firms shift from being net electricity users to net electricity producers in the long run. Investing in energy capital contribute to reducing energy, however will increase the quantity of CO2 emissions due to an increase in electricity production.