Determinants of Energy Use in Turkish Manufacturing Industry: A Supply Side View
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Abstract
This paper aims to assess the supply-side determinants of firm-level energy use. To this end, we first propose a model for a stylized economy using Solovian framework, in which the production function employs energy input, along with capital and labor. We show the full algebraic solution of the model at the steady-state and in the transitional period and derive the supply-side determinants of energy consumption. Then, using firm-level micro panel data on the Turkish manufacturing industry from 2009 to 2015, we test the proposed model with static and dynamic panel data estimators. Our empirical results suggest that the proposed model is consistent with Turkish manufacturing data. Out of the supply-side determinants, firms’ output/value-added and total factor productivity, as a proxy for technological progress, are found to be the most significant determinants of firm-level energy use. Estimations also reveal quite heterogenous effects of technology on energy use in different manufacturing subsectors. Hence, although promoting technological change in the manufacturing industry is, without a doubt, the most convenient way to reduce energy use, policymakers should develop sector-specific incentives to achieve this goal.
JEL Codes: O41, Q41, L60, C33
Keywords: Solow model, energy use, manufacturing industry, firm-level micro panel data
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Berk, İstemi and Yetkiner, H. (2024) “Determinants of Energy Use in Turkish Manufacturing Industry: A Supply Side View”, World Journal of Applied Economics, 10(2), pp. 55-71. doi: 10.22440/wjae.10.2.2.
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References
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Ogulata, R. T. (2002). Sectoral energy consumption in Turkey. Renewable and Sustainable Energy Reviews, 6 (5), 471-480. doi:10.1016/S1364-0321(02)00012-6
Olley, G. S., & Pakes, A. (1996). The Dynamics of Productivity in the Telecommunications Equipment. Econometrica, 64 (6), 1263-1297. doi:10.2307/2171831
Onut, S., & Soner, S. (2007). Analysis of energy use and efficiency in Turkish manufacturing sector SMEs. Energy Conversion and Management, 48 (2), 384-394. doi:10.1016/j.enconman.2006.07.009
Roodman, D. (2009a). How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal, 9 (1), 86–136. doi:10.1177/1536867X0900900106
Roodman, D. (2009b). A note on the theme of too many instruments. Oxford Bulletin of Economics and Statistics, 71 (1), 135-158. doi:10.1111/j.1468-0084.2008.00542.x
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Smyth, R. (2013). Are fluctuations in energy variables permanent or transitory? A survey of the literature on the integration properties of energy consumption and production. Applied Energy, 104, 371-378. doi:10.1016/j.apenergy.2012.10.069
Soytas, U., & Sari, R. (2007). The relationship between energy and production: evidence from Turkish manufacturing industry. Energy Economics, 29 (6), 1151-1165. doi:10.1016/j.eneco.2006.05.019
Su, Y. W. (2018). Electricity demand in industrial and service sectors in Taiwan. Energy Efficiency, 11 (6), 1541-1557. doi:10.1007/s12053-018-9615-y
TURKSTAT. (2021). Turkish Statistical Institute, National Accounts. https://data.tuik.gov.tr/Kategori/GetKategori?p=ulusal-hesaplar-113.
Woodland, A. D. (1993). A micro-econometric analysis of the industrial demand for energy in NSW. The Energy Journal, 14 (2), 57-89. doi:10.5547/ISSN0195-6574-EJ-Vol14-No2-4
Yasar, M., Raciborski, R., & Poi, B. (2008). Production function estimation in Stata using the Olley and Pakes method. The Stata Journal, 8 (2), 221-231. doi:10.5547/ISSN0195-6574-EJ-Vol14-No2-4
Agnolucci, P. (2009). The energy demand in the British and German industrial sectors: Heterogeneity and common factors. Energy Economics, 31 (1), 175-187. doi:10.1016/j.eneco.2008.08.005
Agnolucci, P., & De Lipsis, V. (2020). Fuel demand across UK industrial subsectors. The Energy Journal, 41 (6), 65–86. doi:10.5547/01956574.41.6.pagn
Akyurek, Z. (2020). LMDI decomposition analysis of energy consumption of Turkish manufacturing industry: 2005–2014. Energy Efficiency, 13 (4), 649-663. doi:10.1007/s12053-020-09846-8
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58 (2), 277-297. doi:10.2307/2297968
Arellano, M., & Bond, S. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68 (1), 29-51. doi:10.1016/0304-4076(94)01642-D
Berndt, E. R., & Wood, D. O. (1975). Technology, prices, and the derived demand for energy. The Review of Economics and Statistics, 57 (3), 259-268. doi:10.2307/1923910
Bjorner, T. B., Togeby, M., & Jensen, H. H. (2001). Industrial companies’ demand for electricity: evidence from a micropanel. Energy Economics, 23 (5), 595-617. doi:10.1016/S0140-9883(00)00084-0
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87 (1), 115-143. doi:10.1016/S0304-4076(98)00009-8
Blundell, R., & Bond, S. (2000). GMM estimation with persistent panel data: an application to production functions. Econometric Reviews, 19 (3), 321-340. doi:10.1080/07474930008800475
Bozoklu, S¸., Yilanci, V., & Gorus, M. S. (2020). Persistence in per capita energy consumption: A fractional integration approach with a Fourier function. Energy Economics, 91, 104926. doi:10.1016/j.eneco.2020.104926
Boluk, G., & Koc, A. A. (2010). Electricity demand of manufacturing sector in Turkey: A translog cost approach. Energy Economics, 32 (3), 609-615. doi:10.1016/j.eneco.2010.01.007
Chaudhry, A. A. (2016). A panel data analysis of electricity demand in the Pakistani industrial sector. Energy Sources, Part B: Economics, Planning, and Policy, 11 (1), 73-79. doi:10.1080/15567249.2011.576376
Ediger, V. S¸., & Huvaz, O. (2006). Examining the sectoral energy use in Turkish economy (1980–2000) with the help of decomposition analysis. Energy Conversion and Management, 47 (6), 732-745. doi:10.1016/j.enconman.2005.05.022
European Commission. (2021). Delivering The European Green Deal. https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal/delivering-european-green-deal_en.
Griffin, J. M., & Gregory, P. R. (1976). An intercountry translog model of energy substitution responses. The American Economic Review, 66 (5), 845-857.
Gutierrez-Pedrero, M. J., Tarancon, M. A., del Rio, P., & Alcantara, V. (2018). Analysing the drivers of the intensity of electricity consumption of non-residential sectors in Europe. Applied Energy, 211, 743-754. doi:10.1016/j.apenergy.2017.10.115
Hansen, L. P. (1982). Large Sample Properties of Generalized Method of Moments Estimators. Econometrica, 50 (4), 1029–1054. doi:10.2307/1912775
Henriksson, E., Soderholm, P., & Warell, L. (2014). Industrial electricity demand and energy efficiency policy: the case of the Swedish mining industry. Energy Efficiency, 7 (3), 477-491. doi:10.1007/s12053-013-9233-7
International Energy Agency. (2021). Tracking Industry 2021. https://www.iea.org/reports/tracking-industry-2021.
Kilicaslan, Y., Sickles, R. C., Atay Kayis, A., & Ucdogruk Gurel, Y. (2017). Impact of ICT on the productivity of the firm: evidence from Turkish manufacturing. Journal of Productivity Analysis, 47, 277-289. doi:10.1007/s11123-017-0497-3
Ministry of Energy and Natural Resources. (2012). Energy Efficiency Strategy Paper 2012-2023. https://evcedruzgar.enerji.gov.tr/verimlilik/document/Energy Efficiency Strategy Paper.pdf.
Ministry of Energy and Natural Resources. (2017). National Energy Efficiency Action Plan 2017-2023. https://enerji.enerji.gov.tr/Media/Dizin/EVCED/tr/EnerjiVerimlilii/UlusalEnerjiVerimliliiEylemPlan/Belgeler/UEVEP.pdf.
Ministry of Energy and Natural Resources. (2022). Turkey’s Energy Statistics 2020. https://enerji.gov.tr/duyuru-detay?id=10201.
Narayan, P. K., & Smyth, R. (2007). Are shocks to energy consumption permanent or temporary? Evidence from 182 countries. Energy Policy, 35 (1), 333-341. doi:10.1016/j.enpol.2005.11.027
Ogulata, R. T. (2002). Sectoral energy consumption in Turkey. Renewable and Sustainable Energy Reviews, 6 (5), 471-480. doi:10.1016/S1364-0321(02)00012-6
Olley, G. S., & Pakes, A. (1996). The Dynamics of Productivity in the Telecommunications Equipment. Econometrica, 64 (6), 1263-1297. doi:10.2307/2171831
Onut, S., & Soner, S. (2007). Analysis of energy use and efficiency in Turkish manufacturing sector SMEs. Energy Conversion and Management, 48 (2), 384-394. doi:10.1016/j.enconman.2006.07.009
Roodman, D. (2009a). How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal, 9 (1), 86–136. doi:10.1177/1536867X0900900106
Roodman, D. (2009b). A note on the theme of too many instruments. Oxford Bulletin of Economics and Statistics, 71 (1), 135-158. doi:10.1111/j.1468-0084.2008.00542.x
Sahin, S. (2017). Firm-level decomposition of energy consumption in Turkish manufacturing industry (Policy Research Working Paper No. 8211). World Bank. https://documents1.worldbank.org/curated/en/526101507137346845/pdf/WPS8211.pdf.
Smyth, R. (2013). Are fluctuations in energy variables permanent or transitory? A survey of the literature on the integration properties of energy consumption and production. Applied Energy, 104, 371-378. doi:10.1016/j.apenergy.2012.10.069
Soytas, U., & Sari, R. (2007). The relationship between energy and production: evidence from Turkish manufacturing industry. Energy Economics, 29 (6), 1151-1165. doi:10.1016/j.eneco.2006.05.019
Su, Y. W. (2018). Electricity demand in industrial and service sectors in Taiwan. Energy Efficiency, 11 (6), 1541-1557. doi:10.1007/s12053-018-9615-y
TURKSTAT. (2021). Turkish Statistical Institute, National Accounts. https://data.tuik.gov.tr/Kategori/GetKategori?p=ulusal-hesaplar-113.
Woodland, A. D. (1993). A micro-econometric analysis of the industrial demand for energy in NSW. The Energy Journal, 14 (2), 57-89. doi:10.5547/ISSN0195-6574-EJ-Vol14-No2-4
Yasar, M., Raciborski, R., & Poi, B. (2008). Production function estimation in Stata using the Olley and Pakes method. The Stata Journal, 8 (2), 221-231. doi:10.5547/ISSN0195-6574-EJ-Vol14-No2-4