Macroeconomic implications of energy policy. Final report

Technical Report · Mon Dec 01 04:00:00 EST 1980

OSTI ID:6197746

Gallo, D E

The macroeconomic consequences of energy price increases are discussed in this report. The following conclusions were drawn: (1) Rising energy prices generate macroeconomic impacts in excess of what would be expected from the small share of energy in aggregate production costs. (2) If capital and labor were freely substitutable for energy inputs, and prices adjusted to reflect relative factor scarcity, higher energy prices would have little negative impact on output, growth, and employment. (3) Empirical work indicates that opportunities for industrial sector energy conservation are limited within the existing stock of capital. (4) The long-run potential for achieving reduced energy use in the industrial sector is significant. If investment in new plant and equipment can be increased to an adequate level, in the long-run the negative economic effect of higher energy costs will be inconsequential. (5) It is questionable as to whether the supply of financial capital can be increased without serious economic and social disruption in the short-run. (6) Incentive systems or regulations designed specifically to promote increased efficiency of industrial energy use have the greatest probability of success in minimizing the negative macroeconomic consequences of higher energy costs. This implies that reallocation of existing capital supplies would be more effective than attempts to increase the aggregate supply of financial capital. (7) Capital intensive energy supply strategies compete in financial markets with investment in new plant and equipment. Their use should be weighed carefully against investment opportunities for improvements in industrial end-use efficiency. (DMC)

• Research Organization: California State Univ., Chico (USA). Dept. of Economics
• OSTI ID: 6197746
• Report Number(s): P-110-80-004; ON: DE81903676
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
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COST
ECONOMIC GROWTH
ECONOMIC IMPACT
ECONOMICS
EMPLOYMENT
ENERGY CONSERVATION
ENERGY SUPPLIES
EQUIPMENT
GROSS NATIONAL PRODUCT
INDUSTRIAL PLANTS
INDUSTRY
INVESTMENT
PRICES