Energy Efficiency and Substitution Elasticity

Over the last few decades the links between the economic system and the environment have loomed ever larger, one reason being the peculiarity of the existing energy system. Sustainability in growth processes and the need to reduce concentrations of polluting agents have become central issues in the international agenda, and have significant consequences for energy and climate policy. In this paper we present an empirical analysis of energy efficiency, in terms of substitution elasticity for 29 OECD countries (1975-2007), with the aim of studying the role of energy in production processes and analysing the related policy implications.