Energy demand and energy-related CO 2 emissions in Greek manufacturing: assessing the impact of a carbon tax. by Nikolaos Floros and Andriana Vlachou

Transcription

1 Energy demand and energy-related CO 2 emssons n Greek manufacturng: assessng the mpact of a carbon tax by Nkolaos Floros and Andrana Vlachou Abstract The purpose of ths paper s to study the demand for energy n two-dgt manufacturng sectors of Greece and to evaluate the mpact of a carbon tax on energyrelated CO 2 emssons. The theoretcal model utlzed n the analyss s the two-stage translog cost functon. The model s estmated usng tme seres data over the perod The results ndcate substtutablty between electrcty and lqud fuels (desel and mazout), and substtutablty between captal, energy and labor. A carbon tax of $50 per tone of carbon results n a consderable reducton n drect and ndrect CO 2 emssons from ther 1998 level. Ths mples that a carbon tax on Greek manufacturng s an envronmentally effectve polcy for mtgatng global warmng, although a costly one. Key words: energy demand; CO 2 emssons; carbon tax; manufacturng JEL Classfcaton: D24,Q41,Q48 Please address correspondence to: Andrana Vlachou Assocate Professor Department of Economcs, Athens Unversty of Economcs and Busness 76 Patsson Street, Athens , Greece E-mal: vlachou@aueb.gr Acknowledgement: We would lke to thank Professors Efthymos Tsonas and Andreas Andrkopoulos for helpful comments and suggestons. The usual dsclamer apples.

2 Energy demand and energy-related CO 2 emssons n Greek manufacturng: assessng the mpact of a carbon tax 1. Introducton In recent years the growng concern about the negatve envronmental mpacts of energy producton and consumpton has revved the nterest n studyng the energy structure of dfferent sectors of the economy. In partcular, the combuston of fossl fuels s heavly mpled for the rsng concentratons of greenhouse gases n the earth s atmosphere whch are expected to lead to sgnfcant changes n clmate wth serous economc and socal effects (IPCC, 1996). Carbon doxde (CO 2 ) emssons are beleved to be responsble for approxmately half of the man-made contrbutons to the greenhouse effect. Accordngly, most of the efforts to mtgate global warmng have concentrated on reducng CO 2 emssons. CO 2 emssons account for the majorty of the total greenhouse gases emssons n Greece snce they were responsble for approxmately 80.8% of the total emssons n 1998, whle methane and ntrous oxde accounted for 8.6% and 7.5%, respectvely. The combuston of fossl fuels accounted for 91% of total CO 2 emssons n the same year. CO 2 emssons ncreased by 18% between The contrbuton of the ndustral sector as an end-user to the total CO 2 emssons from fossl fuels (26% n 1998) was only second to the contrbuton of the domestc and tertary sector (Mnstry for the Envronment and Natonal Observatory of Athens, 2000). As result, the study of nterfuel and nterfactor substtuton possbltes n Greek manufacturng can sgnfcantly help n desgnng effectve polces to reduce CO 2 emssons. A number of studes have nvestgated the demand of energy n Greek manufacturng (Caramans 1979; Samoulds and Mtropoulos, 1982; Vlachou and Samoulds, 1986; Donatos and Mergos, 1989; Knts and Panas, 1989; Caloghrou et al., 1997; Chrstopoulos, 2000; Chrstopoulos and Tsonas, 2002). However, most of these studes cover the perod before 1990 and are conducted at a very aggregate level. Moreover, to the best of our knowledge, none of these studes was really 1

3 concerned wth the envronmental mplcatons of the energy demand n manufacturng. Greece, however, as a sgnatory of the UN Framework Convenon on Clmate Change n Kyoto, has certan oblgatons to fulfll jontly wth the other member-states of the E.U. In partcular, under the Kyoto Protocol, the E.U. s commtted to a reducton of 8% of greenhouse gases from ther 1990 level n the perod The burden sharng arrangement for all member states, fnalzed n June 1998, allows Greece to ncrease ts greenhouse emssons by 25% compared to 1990 levels. Ths target mght not seem so restrctve at frst sght. However, accordng to the Mnstry for the Envronment and the Natonal Observatory of Athens (2000), total greenhouse gas emssons have already ncreased by 18% durng the perod Ths mples that great efforts are needed n order to lmt the ncrease to 25% by the year The objectve of ths paper s to formulate and estmate a two-stage translog model usng recent data n order to analyse ntrerfuel and nterfactor substtuton n Greek manufacturng. The analyss s conducted at the two-dgt level n order to avod the shortcomngs of aggregaton. The estmated elastctes are then used to nvestgate the mpact of a carbon tax on the energy-related CO 2 emssons from twodgt manufacturng sectors. Gven the advantages of a carbon tax over alternatve nstruments (Pearce 1991; Vassos and Vlachou 1997a), the analyss provdes an assessment of the possbltes for reducng CO 2 emssons from manufacturng to mtgate global warmng n the case of Greece. The paper s organzed as follows. The second secton presents n bref the theoretcal model and dscusses the data and the estmaton technque. The thrd secton reports and analyzes the emprcal results. The fnal secton s devoted to basc conclusons. 2. The Model and Data The econometrc approach adapted n ths study s a generalzed translog producton fronter, orgnally developed by Chrstensen, Jorgenson, and Lau (1973) and extensvely appled n studes nvestgatng the energy demand of ndustry (see, for example, Berndt and Wood 1975; Grffn and Gregory 1976; Fuss 1977; Pndyck 1979; Vlachou and Samoulds 1986; Calogrou et al. 1997). In the context of ths 2

4 methodologcal approach, we assume that there exsts a twce dfferentable aggregate producton functon for each two-dgt manufacturng sector whch relates the flow of gross output ( Y) to the servces of three nputs: captal ( K ), labor ( L ) and energy ( E ). 1 We further assume that the producton functon s weakly separable n the major categores of captal, labor and energy. 2 The assumpton permts us to construct an energy prce ndex that aggregates the prces of three fuels: electrcty ( EL ), desel ( D ) and mazout ( M ). Under these assumptons, the producton functon can be wrtten as follows: Y = f[k,l,e[el,d,m),t] (1) where T s an ndex of technologcal change. If the factor prces and output level are exogenously determned, ths producton structure can alternatvely be determned by a cost functon of the form C = G[P, P, P (P, P, P ),Y,T] (2) K L E EL D M where C s total cost, and P K, P L and P E are the nput prces of K, L and E, respectvely, whle P EL, P D, and P M are the prces of electrcty, desel and mazout, respectvely. Notce that P E s the aggregate prce ndex of energy whch s homothetc n ts arguments. We represent the cost functon (2) by a non-homothetc translog cost functon. 3 By mposng symmetry on the second-order partal dervatves and assumng exogenously gven nput prces (as n the case of perfect competton), the translog cost functon s specfed as follows: ln C = α o + γ + y n = 1 ln Y + 0.5γ γ y where, j= K, L, E ln Y ln P yy (ln Y) + n = 1 γ 2 τ + n = 1 T ln P β ln P τ I n = 1 + γ T + 0.5γ ττ T 2 n j= 1 γ + γ j yτ ln P ln P T ln Y j (3) 3

5 Shephard s lemma (Shephard 1953) mples quantty of the th nput. Then C / P = X, the cost-mnmzng ln C / ln P = P X / C = S, and the nput demand functons, n terms of cost shares S, take the form n S = β + γ lnp + γ ln Y + γ T (4) j= 1 j j y τ where, j= K,L, E The cost functon must be homogeneous of degree 1 n prces, and satsfy the propertes of a well-behaved cost functon. In addton, the system of equatons (4) n must satsfy the addng up condton ( S = 1. Ths mples the followng parameter restrctons 4 : ) n = 1 β = γ = γ 1; j j n ; γ = 1 = j 0 (5) n = 1 γ y = 0, γ τ = n 0 Two sets of elastctes can be calculated from the system of equatons (4): ) the Allen partal elastctes of substtuton demand ε j. The Allen elastctes are summarzed as follows : σ j ; and ) the factor prce elastctes of σ σ j = ( γ = ( γ j + S 2 S ) /S + S S ) /S S, j 2 j j (6) The prce elastctes of demand are calculated as 4

6 ε ε j =σ =σ j S S j, j (7) We turn now to the dervaton of the energy sub-model, whch permts us to study nterfuel substtuton n two-dgt manufacturng sectors and to construct the aggregate prce ndex of energy to be used n equatons (3) (4). Snce P E s the prce per unt of energy, t s also the cost per unt to the optmzng agent. Ths cost s represented by a homothetc translog functon wth constant returns to scale, whch takes the form ln P n n n = E α 0 + β ln PE = 1 = 1 j= 1 γ j ln P E ln P Ej (8) Cost mnmzng behavor mples that the demand functons for ndvdual energy types, n terms of the cost shares n the cost of aggregate energy, take the form n SE = β + γ j ln PE,, j= EL, D, M j= 1 (9) where S E s the cost shares of the fuel n the cost of aggregate energy, S E = 1. The addng up crteron and the propertes of neoclasscal producton theory requre the followng restrctons : n β = 1; γ j = γ j ; γ j = 0 (10) The Allen-Uzawa partal elastctes of substtuton ( σ ) and the prce elastctes of demand for each energy type can be calculated by usng equatons (6) and (7), respectvely. However, these elastctes are calculated on the assumpton that the total quantty of energy consumed remans constant. Droppng ths assumpton and followng Pndyck (1979), we can estmate the total prce elastctes for each energy type as follows : j 5

7 ε ε * * j =ε = ε j + ε + ε EE EE S S E Ej, j (11) where ε EE s the own prce elastcty of aggregate energy ( E ), calculated from equatons (3) and (4). Estmaton of the complete model s accomplshed n two stages. In the frst stage, we estmate the system (9) subject to the constrans (10). Ths provdes an estmate of the nterfuel substtuton patterns. By substtutng the parameter estmates nto (9), we obtan an estmate Pˆ E of the aggregate prce ndex (up to arbtrary scalng factor α 0 ). Ths estmate serves n the second stage. In partcular, n the second stage, we estmate the system (4) subject to the constrants (5), replacng P E by ts estmate Pˆ E. Data and ther sources The model descrbed above was estmated for twenty two two-dgt manufacturng sectors of Greece employng more than 10 employees, for the years The man source of our data was the Annual Industral Surveys (AIS) of the Natonal Statstcal Servce of Greece (NSSG). Snce the NSSG changed the ndustral classfcaton of several sectors n 1993, t was necessary to adjust the data to the new classfcaton to acheve contnuty and compatblty for the tme seres. The AIS provdes data on total labor compensaton and the number of workers employed. The AIS also provdes data on energy. In partcular, the expendtures and quanttes of electrcty, desel and mazout consumed by the two-dgt manufacturng sectors are avalable from ths source, whle the prce for each energy type s calculated as the rato of these two measures. 5 The quantty of each type of energy was converted nto tons of ol equvalent (TOE). In order to estmate the captal stock, we used the perpetual nventory method. Data on (gross) nvestment and deprecaton at the two-dgt level come from NSSG. The captal stock for the benchmark year (1982) of our study was obtaned from the studes made by Skountzos and Mattheou (1991) and Georganta et al (1994) 6. The 6

8 captal stock was estmated n constant 1982 prces by deflatng gross nvestment and deprecaton by the deflator of nvestment n fxed captal n manufacturng, provded by the NSSG. The return on captal was calculated from value added by subtractng from t total labor compensaton. The prce of captal was calculated by dvdng the return on captal by the estmated net fxed captal. Data on gross output comes from the AIS of the NSSG. Factor expendtures and prces, and gross producton are deflated usng the deflator of fnal manufacturng products for nternal consumpton, provded by the NSSG. On the bass of the data collected for the study, we observe that n the majorty of sectors, the energy share n total cost has been decreasng over the perod Ths seems to reveal a tendency of energy conservaton and of substtuton away from costly fuels by manufacturng frms, as Patsourats and Souflas (1995) have also notced. In partcular, the energy share n the total cost of the sector n 1998 was 19.7% for sector 27, 15.4% for 26, 9.4% for 21 and 8.2% for 17. The most energy ntensve sectors are the basc metal ndustres (27), the non-metallc mneral products (26), the pulp and paper (21), and the textles sector (17). Seven sectors (15,17,21,23,24,26,27) accounted for 91% of the energy consumpton n manufacturng, as Table 1 shows. Almost all manufacturng sectors were electrcty ntensve n Ths seems to be n part explaned by the absence of natural gas from the energy balance of Greece pror to It mght also ndcate a substtutablty between electrcty and lqud fuels over the perod. However, snce a hgh percentage (65% n 1998) of electrcty s generated by lgnte-fred statons, a hgh electrcty consumpton by manufacturng tends to ncrease the CO 2 emssons produced n the country. Estmaton technque For the estmaton of the nterfuel sub-model and the total cost (nterfactor) model, the teratve Zellner method (or the seemngly unrelated regresson estmaton) was used. Ths method, whch s equvalent to maxmum lkelhood estmaton, gves consstent and asymptotcally estmates. 7

9 Table 1. The energy structure of Greek manufacturng n 1998 (Selected sectors) Code Sectors Sector s share n the energy consumpton of manufacturng (%) Fuel share n total energy consumpton of the sector (%) Electrcty Desel Mazout Other 15 Food products & beverages Textles Pulp and paper Coke and refned Petroleum products 24 Chemcals Non-metallc mneral products 27 Basc metal ndustres Total Note: other ncludes lgnte, coal and natural gas. 8

10 3. Emprcal Results Interfuel sub-model Parameter estmates for the energy sub-model are presented n Table 2 7. Most of the parameter estmates are statstcally sgnfcant. In partcular, 73.7 percent of estmated coeffcents are statstcally sgnfcant at 5% level of statstcal sgnfcance, whle 90 percent are statstcally sgnfcant at 10%. The R 2 s for the share equatons are farly hgh when compared wth smlar studes 8. Table 3 presents own and cross prce elastctes for the three energy types, estmated at the mean values of cost shares. The majorty of the own prce elastctes (wth the excepton of nne, of whch sx refer to mazout) are negatve. Moreover, 76.5 percent of the own prce elastctes are statstcally sgnfcant at 5% level of statstcal sgnfcance. Overall, the results suggest that the demand for electrcty s nelastc to ts own prce changes n all sectors snce the majorty of own prce elastctes are less than one. The demand for desel s greater than one n eght sectors (17,23,25,27,28,29,35 and 36), whle the demand for mazout s elastc n only three sectors (18,28, and 36). In short, the demand for desel exhbts the hghest prce responsveness among the three energy types. The cross prce elastctes suggest that electrcty and desel are substtutes n sxteen manufacturng sectors : 15,16,17,19,20,21,23,24,25,26,27,28,29,34,35 and 30. Only n three of these sectors (16,23,29) s ths substtutablty statstcally nsgnfcant at a level of 5%. Electrcty and mazout are substtutes n eleven manufacturng sectors (15,16,17,18,21,23,24,27,28,31 and 36) and ths relaton s not statstcally sgnfcant at a 5% level only n three of them (15,16,31). Between desel and mazout, complementarly prevals snce the cross prce elastcty s negatve n twelve sectors (15,17,19,20,21,24,25,26,28,31,34,36); however, n four sectors (21, 25,28 and 31), ths complementary relaton s nsgnfcant at a 5% level. Overall, there s evdence that electrcty and desel as well as electrcty and mazout are substtutes, whle desel and mazout are complements n most manufacturng sectors. These results can be compared to prevous studes. Vlachou and Samoulds (1986) estmated own and cross prce elastctes for electrcty, lqud fuels and sold fuels n Greek manufacturng (aggregated n ntermedares, equpment, consumpton and total manufacturng), usng data for the perod The reported own prce 9

11 Table 2. Parameter estmates of the nterfuel submodel, β EL β D β M γ ELEL γ DD γ MM γ ELD γ ELM γ DM R 2 DW R 2 DW Code Sectors S EL S EL S M S M 15 Food products and beverages (0.088) (0.019) (0.086) (0.052) (0.005) (0.050) (0.012) (0.049) (0.010) 16 Tobacco (0.139) (0.041)* (0.146) (0.082)* (0.024)* (0.090)* (0.029)* (0.082)* (0.024)* 17 Textles (0.049) (0.012) (0.043) (0.033)* (0.004) (0.026) (0.009) (0.028) (0.007) 18 Wearng apparel (0.079) (0.030) (0.052)* (0.020) (0.011) (0.043) (0.010) (0.022)* (0.027) 19 Leather and leather products (0.071) (0.021) (0.081) (0.042) (0.009)* (0.053) (0.013) (0.046) (0.014) 20 Wood and cork (0.044) (0.020)* (0.051) (0.026) (0.009) (0.036) (0.012)* (0.028) (0.014) 21 Pulp and paper (0.069) (0.010)* (0.064) (0.045) (0.004)* (0.040) (0.005)* (0.042) (0.006)* 23 Coke, refned petroleum products and nuclear fuel (0.050) (0.047)* (0.047) (0.038)* (0.050)* (0.033) (0.035)* (0.025) (0.032)* 24 Chemcals (0.067) (0.089)* (0.065) (0.045)* (0.009)* (0.042)* (0.010)* (0.042)* (0.006) 25 Rubber and plastc products (0.069) (0.010)* (0.064) (0.045) (0.004)* (0.040) (0.005)* (0.042) (0.006)* 26 Non-metallc mneral products (0.171)* (0.022)* (0.190) (0.116) (0.004) (0.144) (0.016)* (0.129) (0.016) 27 Basc metal ndustres (0.024) (0.004) (0.023) (0.020) (0.003)* (0.019) (0.003)* (0.019) (0.003)* 28 Metal products, except machnery (0.059) (0.024)* (0.039)* (0.048) (0.008) (0.021)* (0.019) (0.030)* (0.012) 29 Machnery and equpment n.e.c (0.184)* (0.633)* (0.139) (0.127) (0.014) (0.074) (0.047)* (0.093) (0.173)* 31 Electrcal machnery and apparatus n.e.c (0.032) (0.011) (0.031) (0.022) (0.007) (0.020) (0.009) (0.019) (0.005) 34 Motor vehcles, tralers (0.048) (0.035) (0.032) (0.040)* (0.072)* (0.019) (0.033)* (0.020) (0.012) 35 Other transport equpment (0.038) 0.038)* (α) (0.037) (0.037) (α) (0.037) (α) 36 Furnture: manufacturng n.e.c (0.098) (0.055) (0.049)* (0.079) (0.028)* (0.021)* (0.045) (0.038) (0.020) Note: (a) It ncludes non-electrc energy that s desel and mazout. The fgures n parentheses are the standard errors. The astersk (*) denotes that the coeffcent s not statstcally sgnfcant at 5%. 10

12 Table 3. Own and cross elastctes for fuels n manufacturng Code Sector ε ELEL Ε DD ε MM ε ELD ε DEL ε ELM Ε MEL ε DM ε MD 15 Food products and beverages (0.104) (0.074) (0.115)* (0.024) (0.175) (0.100)* (0.115)* (0.147) (0.023) 16 Tobacco (0.133) (0.448) (0.281)* (0.047)* (0.548)* (0.133)* (0.247)* (0.452)* (0.072)* 17 Textles (0.044) (0.118) (0.119)* (0.012) (0.230) (0.038) (0.129) (0.192) (0.033) 18 Wearng apparel (0.026) (0.106) (0.354) (0.013)* (0.099)* (0.028) (0.178) (0.260) (0.220) 19 Leather and leather products (0.052)* (0.228) (0.368) (0.016) (0.329) (0.056) (0.316) (0.342) (0.094) 20 Wood and cork (0.034)* (0.123)* (0.229) (0.015) (0.168) (0.036) (0.178) (0.202) (0.091) 21 Pulp and paper (0.069) (0.318) (0.121) (0.007) (0.353) (0.064) (0.129) (0.497)* (0.020)* 23 Coke, refned petroleum products and nuclear fuel (0.154) (1.470)* (0.045) (0.144)* (1.044)* (0.103) (0.035) (0.932)* (0.044)* 24 Chemcals (0.057) (0.324)* (0.237) (0.015) (0.418) (0.053) (0.240) (0.212) (0.035) 25 Rubber and plastc products (0.037) (0.258) (0.290) (0.014) (0.456) (0.035)* (0.290)* (0.366)* (0.096)* 26 Non-metallc mneral products (0.173)* (0.067) (0.538)* (0.023) (0.256) (0.193)* (0.482)* (0.262) (0.060) 27 Basc metal ndustres (0.026) (0.130) (0.092) (0.004) (0.141) (0.025) (0.096) (0.139) (0.015) 28 Metal products, except machnery (0.056) (0.102) (0.310) (0.022) (0.243) (0.035) (0.442) (0.153)* (0.178)* 29 Machnery and equpment n.e.c (0.150)* (0.186) (0.889) (0.056)* (0.678)* (0.109) (1.118) (0.181) (0.153) 31 Electrcal machnery and apparatus n.e.c (0.025)* (0.152)* (0.217)* (0.011)* (0.202)* (0.023)* (0.207)* (0.108)* (0.054)* 34 Motor vehcles, tralers (0.054) (0.422)* (0.217) (0.044) (0.192) (0.028)* (0.231)* (0.070) (0.134) 35 Other transport equpment (α) (α) (α) (0.045) (0.217) (0.045) (0.217) 36 Furnture: manufacturng n.e.c (0.088) (0.475) (0.505) (0.050) (0.763) (0.022) (0.475) (0.336) (0.472) Note:The fgures n parentheses are the standard errors. The astersk (*) denotes that the elastcty s not statstcally sgnfcant at 5%. 11

13 elastctes for electrcty are: n total manufacturng, n ntermedares, n equpment, and n consumpton. These estmates are very close to the own prce elastctes of electrcty estmated by ths study. Vlachou and Samoulds (1986) also reported the followng own prce elastctes for lqud fuels: n total manufacturng, n ntermedares, n equpment, and n consumpton. These estmates are lower than the own prce elastctes for desel and mazout calculated by ths study, suggestng a structural change away from lqud fuels n the 1980s and 1990s. It should be also mentoned that Vlachou and Samoulds (1986) found that electrcty and lqud fuels are substtutes n the three major manufacturng sectors. Ths result suggested, accordng to the authors, that manufacturng could move away from expensve mported lqud fuels by usng electrcty, produced by ndgenous sources lke lgnte or renewable energy sources. Ths actually seems to have happened n the last three decades as captured by the ncreased share of electrcty n the energy consumpton of manufacturng. 9 Interfactor model The parameter estmates of the aggregate model are reported n Table 4. The majorty (74 percent) of the estmated coeffcents are statstcally sgnfcant at a 5% level of statstcal sgnfcance. The R 2 s are very hgh mplyng that the cost shares, and for that matter the demand for the three productve factors, are farly well explaned by the translog specfcaton. Prce elastctes, calculated at the mean values of cost shares, are presented n Table 5. All own prce elastctes are negatve, wth the excepton of two ( ε κκ n sector 34, and ε EE n sector 36). 10 Own prce elastctes show that the demand for captal s nelastc n all sectors; when compared wth the demand of labor and the demand of energy, t appears to be more nelastc than the latter n most sectors. The demand for labor s also nelastc n all sectors, expect sector 17. The own prce elastctes of energy are statstcally sgnfcant n the majorty of the sectors. They are less than one, wth the excepton of sectors 20,22 and 26. Although our estmates are not drectly comparable to Chrstopoulos' (2000), we note wth cauton that our estmates of own prce elastctes are hgher (n most sectors) than the estmates provded by Chrstopoulos (2000) for aggregate 12

14 Table 4. Parameter estmates of the total cost model, β K β E β L γ KK γ KE γ KL γ LE γ LL γ ΕΕ γ LY γ KY γ ΕY γ TK γ ΤΕ γ ΤL R 2 DW R 2 DW Sectors S K S K S E S E 15 Food products and beverages 3,239-0,046-2,194 0,232-0,039-0,193-0,011 0,203 0,050 0,190-0,183-0,007 0,010-0,001-0,009 0,995 1,711 0,988 3,111 (0.164) (0.084*) (0.126) (0.012) (0.006) (0.011) (0.007*) (0.091) (0.006) (0.015) (0.017) (0.009*) (0.000) (0.000) (0.000) 16 Tobacco 3,442 0,026-2,468 0,173-0,006-0,166 0,001 0,165 0,006 0,097-0,095-0,002 0,007 0,000-0,007 0,966 1,191 0,7968 1,409 (0.432) (0.040*) (0.428) (0.017) (0.002) (0.019) (0.003*) (0.02) (0.003) (0.027) (0.027) (0.002*) (0.001) (0.000*) (0.001) 17 Textles 3,306-0,175-2,131 0,241-0,020-0,221 0,011 0,210 0,009 0,173-0,189 0,026 0,009 0,000-0,009 0,951 1,218 0,75 1,058 (0.184) (0.070) (0.130) (0.017) (0.009) (0.012) (0.009*) (0.010) (0.015*) (0.012) (0.016) (0.007) (0.001) (0.000*) (0.001) 18 Wearng apparel 5,213 0,048-4,261 0,183-0,003-0,180 0,000 0,179 0,003 0,205-0,203-0,002 0,013 0,000-0,013 0,956 1,946 0,17 1,607 (0.669) (0.156*) (0.705) (0.021) (0.006*) (0.022) (0.005*) (0.024) (0.006*) (0.032) (0.031) (0.001*) (0.001) (0.000*) (0.001) 19 Leather and leather products 3,993-0,241-2,753 0,202-0,012-0,190-0,001 0,191 0,013 0,117-0,130 0,013 0,014 0,000-0,014 0,983 2,149 0,945 2,227 (0.406) (0.054) (0.410) (0.014) (0.002) (0.014) (0.003*) (0.014) (0.003) (0.019) (0.019) (0.003) (0.001) (0.000*) (0.001) 20 Wood and cork 1,808 0,184-0,991 0,166-0,014-0,152 0,038 0,114-0,024 0,104-0,013-0,091 0,011-0,005-0,006 0,936 1,330 0,955 2,301 (0.377) (0.129*) (0.389) (0.028) (0.010*) (0.028) (0.013) (0.032) (0.012) (0.063*) (0.059*) (0.022) (0.001) (0.001) (0.001) 21 Pulp and paper 6,194-3,634-1,560 0,241-0,103-0,138-0,017 0,155 0,120 0,043-0,239 0,196 0,005-0,003-0,002 0,962 1,044 0,888 1,093 (0.849) (1.026) (0.709) (0.016) (0.017) (0.013) (0.031*) (0.029) (0.020) (0.038*) (0.047) (0.057) (0.001) (0.002*) (0.001) 22 Prntng and publshng 1,630 0,589-1,219 0,205 0,005-0,210-0,005 0,215 0,000 0,010 0,021-0,032 0,009 0,001-0,010 0,991 1,152 0,686 2,236 (0.784) (0.205) (0.802*) (0.014) (0.004*) (0.014) (0.005*) (0.015) (0.005*) (0.043*) (0.042*) (0.011) (0.002) (0.000*) (0.002) 23 Coke. refned petroleum products and nuclear fuel 2,820-0,701-1,119 0,181-0,069-0,112-0,032 0,144 0,101 0,011-0,058 0,046 0,016-0,014-0,002 0,956 1,784 0,948 2,177 (0.824) (0.865*) (0.376) (0.025) (0.024) (0.013) (0.011) (0.016) (0.025) (0.018*) (0.046*) (0.048*) (0.002) (0.002) (0.001) 24 Chemcals 3,154-1,212-0,942 0,196-0,030-0,166-0,010 0,177 0,040-0,001-0,065 0,067 0,009-0,005-0,004 0,965 0,511 0,970 0,460 (0.820) (0.512) (0.826*) (0.029) (0.015) (0.040) (0.024*) (0.058) (0.011) (0.065*) (0.043*) (0.028) (0.001) (0.001) (0.001) 25 Rubber and plastc products 3,685 0,017-2,702 0,193-0,013-0,181-0,041 0,222 0,054 0,092-0,098 0,006 0,010 0,001-0,011 0,972 2,082 0,898 2,185 (0.532) (0.274*) (0.388) (0.016) (0.008*) (0.011) (0.007) (0.009) (0.007) (0.019) (0.026) (0.014*) (0.000) (0.000*) (0.001) 26 Non-metallc mneral products 2,729 4,472-6,201 0,197 0,042-0,239 0,073 0,166-0,115 0,257-0,029-0,228 0,016-0,021 0,005 0,990 1,438 0,936 0,573 (0.975) (1.339) (1.479) (0.024) (0.020) (0.020) (0.051*) (0.059) (0.048) (0.074) (0.045*) (0.068) (0.001) (0.003) (0.003*) 27 Basc metal ndustres 1,849-0,054-0,795 0,205-0,070-0,136 0,014 0,121 0,056-0,023 0,023 0,001 0,005-0,007 0,002 0,976 1,284 0,952 1,232 (0.384) (0.372*) (0.263) (0.022) (0.031) (0.016) (0.020*) (0.02) (0.039*) (0.033*) (0.049*) (0.050*) (0.001) (0.001) (0.001) 28 Metal products. except machnery 4,092 0,133-3,225 0,246-0,022-0,224-0,011 0,235 0,032 0,106-0,097-0,009 0,008 0,000-0,008 0,984 1,785 0,989 1,742 (0.552) (0.081*) (0.539) (0.011) (0.002) (0.011) (0.004) (0.012) (0.003) (0.028) (0.029) (0.004) (0.001) (0.000*) (0.001) 29 Machnery and equpment n.e.c. 5,420-0,211-4,209 0,247-0,009-0,237-0,004 0,242 0,014 0,169-0,180 0,012 0,008 0,000-0,008 0,888 1,590 0,967 1,957 (0.743) (0.069) (0.814) (0.022) (0.002) (0.027) (0.012) (0.026) (0.002) (0.040) (0.037) (0.003) (0.001) (0.000) (0.001) 30 Offce machnery and computers 5,259 0,223-4,482 0,030-0,039 0,009-0,011 0,001 0,050 0,190-0,183-0,007 0,010-0,001-0,009 0,605 1,792 0,430 2,692 (1.615) (0.139*) (0.149) (0.012) (0.006) (0.011*) (0.007*) (0.091*) (0.007) (0.008) (0.017) (0.009*) (0.000) (0.000) (0.005*) 31 Electrcal machnery and apparatus n.e.c. 2,591-0,270-1,321 0,229-0,040-0,189 0,013 0,176 0,027 0,018-0,023 0,005 0,009-0,001-0,008 0,918 0,918 0,905 1, Rado. televson and communcaton equpment and apparatus (0.864) (0.229*) (0.909*) (0.046) (0.012) (0.049) (0.015*) (0.055) (0.008) (0.038*) (0.036*) (0.010*) (0.001) (0.001) (0.002) 1,705-0,019-0,685 0,188-0,006-0,182 0,002 0,180 0,005-0,054 0,055-0,001 0,014 0,000-0,014 0,960 0,914 0,950 1,410 (0.297) (0.011*) (0.284) (0.033) (0.001) (0.032) (0.001*) (0.017) (0.001) (0.036*) (0.037*) (0.001*) (0.002) (0.000) (0.002) 33 Medcal. precson and optcal nstruments 5,295 0,070-4,365 0,235-0,006-0,229-0,001 0,230 0,007 0,205-0,200-0,005 0,013-0,001-0,012 0,979 1,392 0,921 3,003 (0.280) (0.038*) (0.270) (0.011) (0.002) (0.011) (0.003*) (0.011) (0.004) (0.015) (0.016) (0.002) (0.001) (0.000) (0.001) 34 Motor vehcles. tralers 4,165-0,149-3,016 0,259-0,012-0,247-0,002 0,249 0,014 0,100-0,107 0,007 0,007 0,000-0,007 0,935 1,020 0,867 1,888 (0.609) (0.043) (0.595) (0.025) (0.002) (0.027) (0.003*) (0.024) (0.003) (0.029) (0.029) (0.002) (0.001) (0.000*) (0.001) 35 Other transport equpment 2,469 0,168-1,638 0,183-0,002-0,181-0,004 0,185 0,006 0,040-0,032-0,008 0,015-0,001-0,014 0,964 1,293 0,819 1,309 (0.515) (0.137*) (0.553) (0.009) (0.002*) (0.010) (0.008*) (0.013) (0.007*) (0.030*) (0.028*) (0.008*) (0.001) (0.001) (0.001) 36 Furnture: manufacturng n.e.c. 4,564-0,387-3,177 0,196-0,006-0,190-0,029 0,219 0,035 0,137-0,165 0,028 0,011 0,000-0,012 0,955 1,185 0,673 1,271 (1.031) (0.442*) (0.814) (0.034) (0.014*) (0.027) (0.012) (0.026) (0.010) (0.040) (0.051) (0.023*) (0.001) (0.000*) (0.001) Note: The fgures n parentheses are the standard errors. The astersk (*) denotes that the coeffcent s not statstcally sgnfcant at 5%. 13

15 Table 5. Prce elastctes for captal, labor and energy ε KK ε LL ε EE ε KL ε LK ε LE ε EL ε KE ε EK Sectors 15 Food products and beverages (0.020) (0.277) (0.059) (0.006) (0.010) (0.020)* (0.108)* (0.011)* (0.104)* 16 Tobacco (0.030) (0.060) (0.151) (0.030) (0.060) (0.009) (0.159) (0.003) (0.095) 17 Textles (0.003) (0.243) (0.172) (0.023)* (0.030)* (0.023) (0.106) (0.011) (0.068) 18 Wearng apparel (0.044) (0.048) (0.284) (0.046) (0.045) (0.010) (0.256) (0.012)* (0.295)* 19 Leather and leather products (0.026) (0.032) (0.123) (0.026) (0.031) (0.006)* (0.105)* (0.012) (0.239) 20 Wood and cork (0.053) (0.078) (0.156) (0.055) (0.069) (0.031) (0.172) (0.019) (0.131) 21 Pulp and Paper (0.034)* (0.081) (0.117)* (0.027) (0.035) (0.066)* (0.147)* (0.040)* (0.117)* 22 Prntng and publshng (0.027) (0.031) (0.294) (0.027) (0.029) (0.011)* (0.287)* (0.007) (0.206) 23 Coke. Refned petroleum products and nuclear fuel (0.040) (0.032)* (0.143)* (0.017)* (0.057)* (0.058)* (0.064)* (0.036)* (0.132)* 24 Chemcals (0.127)* (0.038) (0.108) (0.068)* (0.118)* (0.036)* (0.157)* (0.040)* (0.302)* 25 Rubber and plastc products (0.026) (0.025)* (0.103)* (0.019) (0.030) (0.021)* (0.104)* (0.014)* (0.110)* 26 Non-metallc mneral products (0.051) (0.178)* (0.229) (0.043) (0.060) (0.155)* (0.241)* (0.044) (0.095) 27 Basc metal ndustres (0.050)* (0.073) (0.137) (0.037)* (0.060)* (0.072) (0.069) (0.070)* (0.109)* 28 Metal products. Except machnery (0.020)* (0.027)* (0.075) (0.020)* (0.025)* (0.009) (0.086) (0.003)* (0.040)* 29 Μachnery and equpment n.e.c (0.043) (0.043) (0.108) (0.041)* (0.044)* (0.004) (0.082) (0.005)* (0.107)* 30 Offce machnery and computers (0.023) (0.026) (0.538)* (0.021) (0.024) (0.013) (0.448) (0.011) (0.453) 31 Electrcal machnery and apparatus n.e.c (0.084)* (0.047)* (0.072)* (0.046)* (0.071)* (0.023) (0207) (0.024)* (0.332)* 32 Rado. televson and communcaton Equpment and apparatus (0.045)* (0.053) (0.120) (0.048)* (0.100)* (0.004) (0.171) (0.002)* (0.149)* 33 Medcal. precson and optcal nstruments (0.024)* (0.022)* (0.148) (0.023)* (0.022)* (0.006) (0.123) (0.004) (0.069) 34 Motor vehcles. Tralers (0.057)* (0.046)* (0.118) (0.055)* (0.047)* (0.005) (0.121) (0.004)* (0.079)* 35 Other transport equpment (0.033)* (0.018) (0.284) (0.035)* (0.014)* (0.011)* (0.287)* (0.009) (0.092) 36 Furnture: manufacturng n.e.c (0.105)* (0.043)* (0.095) (0.041)* (0.055)* (0.025)* (0.325)* (0.007) (0.126) Note: The fgures n parentheses are the standard errors. The astersk (*) denotes that the elastcty s not statstcally sgnfcant at 5%. 14

16 manufacturng usng data for the perod. Chrstopoulos and Tsonas (2002), however, provded hgher own elastctes whch are much closer to ours. Ths mght ndcate structural changes whch started n the 1980s and contnued n the 1990s, leadng to greater responsveness of the demand of E, K, and L to prce changes. The estmates of cross prce elastctes show that the productve factors are substtutes n the majorty of the sectors. In partcular, energy and captal are substtutes n sxteen of the twenty-two sectors under study; however, n sx (of these sxteen) sectors, the cross prce elastcty between K and E s not statstcally dfferent from zero. Labor and energy are substtutes n twenty sectors but n nne sectors ε LE s not statstcally dfferent from zero. As a result, an ncrease n the prce of energy wll lead to an ncrease n the demand for captal and labor as energy wll be substtuted by these two nputs n producton. Captal and labor are substtutes n seventeen sectors but only n eght sectors s the cross elastcty between captal and labor statstcally sgnfcant at a 5% level. All the cross prce elastctes between captal, labor and energy are less than one, ndcatng weak substtutablty or complementarty. It should be noted that both our (dsaggregate) study and Chrstopoulos (2000), and Chrstopoulos and Tsonas (2002) (aggregate) studes ndcate an overall substtutablty between K and E, E and L, and K and L n Greek manufacturng. Substtuton possbltes are weak. However, our study suggests that they are stronger than those ndentfed by Chrstopoulos (2000) and closer to those reported n Chrstopoulos and Tsonas (2002). Interestngly, Caramans (1979) dentfed the same substtutablty patterns. Moreover, Samoulds and Mtropoulos (1982) and Donatos and Mergos (1989) also found substtutablty between energy and captal n Greek manufacturng. 11 The mpact of a carbon tax Accordng to the Mnstry for the Envronment and the Natonal Observatory of Athens (2000, 41), the ndustral sector (extractve ndustry excludng energy, manufacturng and constructon) accounted, as an end-user, for 26% of total CO 2 emssons from fossl fuels n Greece n About 45% of energy-related CO 2 15

17 emssons n ndustry arsed from the drect consumpton of fossl fuels n order to meet ndustral demands for steam and heat producton, whle the remanng 55% of ndustral needs (operaton of furnaces, ovens and lghtng) are covered by electrcty (bd.). Table 6 presents the contrbuton of each two-dgt sector to total CO 2 emssons from manufacturng as an energy end-user n 1998 and t s based on the energy data collected for ths study and on the emsson factors provded by the Mnstry for the Envronment and the Natonal Observatory of Athens (2000). We observe that the major CO 2 emssons contrbutors are sectors 26, 27, 15, 17, 24, 21 and 23. The table also presents the contrbuton of each energy type to total CO 2 emssons produced by each sector n We note that electrcty s the major contrbutor n almost all sectors, a fact that s n tandem wth the electrcty-ntensty of the Greek manufacturng mentoned before. A number of polcy nstruments are avalable for reducng CO 2 emssons. One wdely dscussed opton s the carbon tax (see, for nstance, Poterba 1991; Pearce 1991; Commsson of the European Communtes, 1991, 1993; Agostn et al., 1992; Mabey and Nxon 1997; Vassos and Vlachou, 1997a; Shogren and Toman, 2000). For the case of Greece, to the best of our knowledge, a lmted number of studes have nvestgated the mpact of a carbon tax on the electrcty supply ndustry (Vlachou et al 1996;Vassos and Vlachou 1997a,b) and on manufacturng (Patsourats and Souflas, 1995). 12 In our study, we nvestgate the mpact of a carbon tax on CO 2 emssons from two-dgt manufacturng sectors n 1998 on the bass of total prce elastctes for each energy type calculated accordng to the formulae (11) and reported n Table 7. In estmatng the mpact of the tax, we take the structure of manufacturng as unchanged; ths holds true as long as prce changes are not large to nduce a structural change. Ths means that only short-to-medum term (5-15 years) effects of a carbon tax can be analyzed and also that the carbon tax appled can not be too hgh. Furthermore, t should be noted that the mpact of a carbon tax estmated n ths way s only partal, gven that our model s a statc producton/supply sde model for manufacturng. Adjustments nduced by the tax at the economy-wde level (whch also react back on manufacturng) can not be captured by ths model. Despte these restrctons, our modellng allows us to derve valuable results for manufacturng at a dsaggregate level. Ths s qute mportant n vew of the fact that bottom-up and engneerng 16

18 Table 6: CO 2 emssons from manufacturng by sector and fuel, 1998 Code Sectors Sector share (%) n total CO 2 emssons of manufacturng Fuel share (%) n total CO 2 emssons of the sector Electrcty Desel Mazout Other 15 Food products and beverages Tobacco Textles Wearng apparel Leather and leather products Wood and cork Pulp and paper Prntng and publshng Coke, refned petroleum products and nuclear fuel 24 Chemcals Rubber and plastc products Non-metallc mneral products Basc metal ndustres Metal products, except machnery Machnery and equpment n.e.c Offce machnery and computers Electrcal machnery and apparatus n.e.c Rado, televson and communcaton equpment and apparatus 33 Medcal, precson and optcal nstruments 34 Motor Vehcles, tralers Other transport equpment Furnture: manufacturng n.e.c Recyclng Total Manufacturng

19 Table 7. Total prce elastctes for energy types Sectors ε* ELEL ε* DD ε* MM ε* ELD ε* DEL ε* ELM ε* MEL ε* DM ε* MD 15 Food products and beverages Tobacco Textles Wearng apparel Leather and leather products Wood and cork Pulp and paper Coke, refned petroleum Products and nuclear fuel Chemcals Rubber and plastc products Non-metallc mneral products Basc metal ndustres Metal products, except machnery Machnery and equpment n.e.c Electrcal machnery and apparatus n.e.c Motor vehcles, tralers Other transport equpment Furnture: manufacturng n.e.c

20 studes advocate that there are unexplored opportuntes for mprovements n energy effcency and for shfts to non-carbon ntensve fuels. Although we have appled dfferent levels of carbon taxes on 1998 fuel prces (the last year of our study), for the sake of space we report here the results of a tax of $50 per tone of carbon. 13 Snce the prce of each energy type collected for ths study dffers by sector, a tax of $50 per ton of carbon leads to dfferent ncreases n the prce of the same fuel across sectors. 14 The results of a tax of $50 per ton of carbon are reported n the thrd column of Table 8 ( wthout electrcty restructurng ). 15 A $50 tax per ton of carbon leads to an overall 17.6% reducton n CO 2 emssons from ther 1998 level. In partcular, the reducton n CO 2 emssons related to electrcty consumed by total manufacturng s 19.1% from ther 1998 level, the reducton related to desel consumpton s 8.6% and that related to mazout consumpton s 11.3%. The overall 17.6% reducton n CO 2 emssons from ther 1998 level decomposes nto a 15.4 % reducton n CO 2 emssons related to electrcty consumpton and nto a 2.2% reducton n CO 2 emssons related to lqud fuels consumpton. These CO 2 reductons are the outcome of energy conservaton, nterfuel substtuton, and energy substtuton by other factors of producton, all trggered by ncreases n energy prces due to the tax. However, the nelastc demand for energy nputs, the weak substtuton possbltes, and the heavy dependence of manufacturng on electrcty lmt the effectveness of the carbon tax n reducng drect CO 2 emssons from manufacturng. Energy ntensve sectors such as food and beverages (15), textles (17), non metallc products (26) and basc metal ndustres (27), ndcate hgh reductons n CO 2 emssons due to the tax. In partcular, these four sectors account for the 88.3 % of the overall reducton n CO 2 emssons from manufacturng. For sectors 26 and 27, ths reducton s manly accounted by the reducton n electrcty-related CO 2 emssons. For sectors 15 and 17, the reducton s both attrbuted to the fall n electrcty and mazout related emssons. These results clearly show the mportance of targetng for reducton the CO 2 emssons generated by the electrcty consumed by manufacturng. On the other hand, the observed reductons n drect emssons ndcate that there do not exst ample low cost effectve optons for reducng CO 2 emssons from manufacturng. Ths concluson s based on the well estabshed argument n envronmental 19

21 Table 8. The mpact of a carbon tax of $50 per ton of carbon on CO 2 emssons (Percentage reducton from 1998 CO 2 emssons) Code Sectors Wthout electrcty Wth electrcty restructurng restructurng 15 Food products and beverages Tobacco Textles Wearng apparel Leather and leather products Wood and cork Pulp and paper Prntng and publshng Coke, refned petroleum Products and nuclear fuel 24 Chemcals Rubber and plastc products Non-metallc mneral products Basc metal ndustres Metal products, except machnery Machnery and equpment n.e.c Offce machnery and computers Electrcal machnery and apparatus n.e.c. 32 Rado, televson and communcatons equpment and apparatus 33 Medcal, precson and optcal nstruments 34 Motor vehcles, tralers Other transport equpment Furnture: manufacturng n.e.c Total Manufacturng

22 economcs that a cost mnmzng ndustral frm tends to reduce ts CO 2 emssons as long as ts margnal control cost s less or equal to the tax per unt of emsson. In our case, manufacturng frms, followng ths rule, are able to reduce drect CO 2 emssons (attrbutable to non-electrc energy) from ther 1998 level only by 2.2% at a margnal cost less or equal to $50 per ton of carbon (or ts equvalent of a $13.5/tn CO 2 ) - a cost level whch s consdered to be on the low sde (see, for example, the Mnstry for the Envronment 2002, 77). Renewable energy sources (RES), favored by a carbon tax, are also expected to have a sgnfcant contrbuton to reducng CO 2 emssons from manufacturng. It s nterestng to notce that after the ntroducton of Law 2244/94, establshng ncentves for nvestments n RES, and the Operatonal Program for Energy, funded by EU, there has been a growng nterest for nvestng n wnd energy, small hydro-electrc producton and n energy conservaton by ndustral frms. As t has been noted above, our model estmated by tme-seres data s not able to capture the (drect) use of natural gas n manufacturng whch started only recently, n However, the penetraton of natural gas n manufacturng s expected to replace lqud fuels, especally mazout, and to promote the development of combned heat and power (CHP) generaton systems, whch have a hgh energy effcency, n ndustral frms wth a hgh energy consumpton. Prevous studes (Vlachou et al. 1996; Vassos and Vlachou 1997a,b) have ndcated that lgnte generaton n Greece can be replaced by natural gas, hydro and other renewable generatng technologes as well as wth coal or lgnte technologes wth CO 2 removal capabltes, all resultng n reducng CO 2 emssons. To take nto consderaton the mpact of electrcty restructurng (effected ndependently from any carbon tax polcy) on energy-related CO 2 emssons attrbuted to manufacturng, we accounted for changes n the fuel structure of power producton (ncludng natural gas generaton), on the bass of the baselne projectons of the Natonal Acton Plan (NAP) for 2010, offcally provded by the Mnstry for the Envronment (2002). Accordng to these projectons, the share of natural gas n electrcty generaton ncreases from almost zero n 1995 to 28.4% n At the same tme, the share of lgnte generaton decreases from 69.6% n 1995 to 47.5% n 2010; the share of lqud fuels decreases from 20.1% to 13%, whle that of hydroelectrc and other renewable generaton remans almost the same, that s 10% n 21

23 1995 and 11% n 2010 (Mnstry for the Envronment, 2002, 26). As a result of these structural changes, the annual average growth rate of CO 2 emssons from electrcty generaton decreases from 3.1 % durng the perod to 1.6% durng the perod However, whle the average factor of CO 2 emssons per MWh s reduced by the year 2010, at the same tme the average cost per MWh ncreases by 11% approxmately, accordng to our estmatons on the bass of the NAP baselne scenaro projectons and the NAP cost data. When the carbon tax combnes wth ths (ndependent) restructurng of electrcty producton, one expects t to become more effectve n reducng energy-related CO 2 emssons from manufacturng; however, the cost burden on manufacturng also ncreases. The results of a tax of $50 per ton of carbon wth electrcty generaton restructurng are reported n the fourth column of Table 8. A tax of $50 per ton of carbon results n an overall 30.4% reducton n CO 2 emssons from ther 1998 level. A porton of 92.8% of ths overall reducton s attrbuted to electrcty consumpton and the rest (7.2%) to lqud fuels consumpton. The four energy ntensve sectors, 15, 17, 26, and 27 account for 82.2% of the overall reducton n CO 2 emssons from manufacturng. Despte the small own and cross prce elastctes of electrcty that characterze manufacturng, the mpact of electrcty prce ncreases (due to ts restructurng and the mposton of the carbon tax) and that of lower emssons factor are sgnfcant n scale, gven the electrcty-ntensty of the sector. To put our result n a comparatve framework, let us now revew the Natonal Acton Plan (NAP) of Greece to reduce Greenhouse Gas (GHG) emssons for the perod from ther baselne level. 16 We are partcularly nterested n the level of emssons reductons to be acheved by the NAP and n the unt cost of abatement. The NAP wll reduce total GHG emssons n Greece by 12.4% from ther baselne level n the year In partcular, the NAP wll reduce GHG emssons from electrcty generaton by 13.1 %. In ndustry (conssted of the extractve sector except from energy, manufacturng and constructon), the NAP wll reduce total GHG emssons n 2010 by 786 kt CO 2 -equvalent,.e. a 5.1% reducton from ther baselne level 17 ; electrcty generaton s emssons attrbuted to the ndustral sector through ts consumpton of electrcty are ncluded n the energy sector, not n ndustry. The NAP also provdes an estmate of the cost of the proposed measures to reduce GHG emssons n constant 1997 dollars (The Mnstry for the Envronment, 22