Energy Efficiency and Capital Embodied Technical Change: The Case of Mexican Cement Manufacturing

This paper analyses energy efficiency in the Mexican cement industry by studying disaggregated data at the plant and production unit level. A short-run production function is examined to look at the substitution possibilities between labour and energy with given equipment, but these are found to be limited (as expected). Instead, reduction of energy use per unit of output is mainly due to capital embodied technical progress: the most important improvements in plant efficiency are related to investments in new pieces of specific equipment. Average energy intensity of the branch as a whole is, therefore, mainly explained by capacity expansion. Finally, the importance of factor prices and the relevance of our results to other industries are discussed.