Greening Industry Essays on industrial energy use and markets for forest raw materials

Abstract: The overall purpose of this thesis is to investigate market developments and policy issues that influence the environmental performance of the industry sector. The analysis concentrates mainly on the industry’s input use in the form of energy and forest raw materials. The thesis consists of an introductory part, and five self-contained papers. Paper I addresses important market signals and firm specific management practices that may explain differences in observed energy intensities across industrial firms. The paper combines interview statistics with secondary data on energy prices, output etc., that are used in a simple econometric model in which the energy intensities of 89 process firms over the time period 2004-2010 are analyzed. The descriptive results show a significant increase in firm and top management energy efficiency awareness. The respondents stress that increased awareness is due to rising energy costs. In line with this, the model estimations show that awareness will not have an effect on firm’s energy intensity. Instead, rising energy prices will significantly reduce the energy intensity. Paper II addresses the role of voluntary energy efficiency programs in the industrial sector. We expand on earlier work by explicitly considering the self-selection mechanism in these programs as well as the role of different management and decisionmaking practices for understanding program outcomes. The results show that the probability for choosing to participate in PFE as well as the level of self-reported energy savings for those who participate tend to increase with increased electricity intensity and electricity use. Different management practices also affect the probability of participation; firms in which the energy manager has fewer responsibilities and works closer to the CEO have been more likely to participate in the program. The above suggests that PFE may primarily have attracted firms that already have had plenty of experience with energy efficiency issues. Increasing the use of renewable energy is of principal EU energy policy concern. In this respect, investigating European trade in forest raw materials is important for understanding how industry sectors in the EU will be affected by these policies. Papers III and IV therefore, quantify and analyze possible trade patterns in forest raw materials in the presence of EU energy policy. Specifically, in Paper III the White Paper and the RES-E Directive are analyzed whilst the RES2020 Directive is of focus in Paper IV. The analysis builds on developing and employing a partial equilibrium model of trade in selected forest raw materials in Europe. In Papers III and Paper IV, the results suggest that the policy implementations will increase the trade in forest raw materials by up to 67 and 110 percent, respectively. Since the national goals in the RES2020 Directive are mandatory in contrast to the indicative recommendations stated in previous EU energy policies on renewables, Paper IV concludes that more ambitious goals will inevitably affect the input competing industries. Finally, Paper V provides a critical survey of previous econometric analyzes of supply and demand elasticities in wastepaper markets. A key finding is that the own-price elasticity of wastepaper supply is overall low (around 0.20-0.30). This adds to our understanding of the price volatility in wastepaper markets, and carries important implications for the impacts of – and the efficient choice between – price- and quantity-based waste management policies.