Substitute or complement? Assessing renewable and non-renewable energy in OCED countries

The elasticity of inter fuel substitution between renewable and non-renewable energy is key to establishing effective climate change policy. This is the first study to estimate the elasticity of substitution between different fossil fuels and renewable resources. We used twelve manufacturing industry-level datasets for the OECD countries from 1995 to 2009. We found a complementary relationship from non-renewable energy to renewable energy in eight industries, whereas a substitute relationship was maintained for four industries. In particular, the food and pulp industries had a strong complementary relationship.