Browsing by Subject "substitution effect"

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  • Valsta, Lauri; Poljatschenko, Victoria (2021)
    The carbon emissions displacement effect of Finnish logs for mechanical wood products by dominant tree species (Scots pine, Pinus sylvestris L.; Norway spruce, Picea abies (L.) H. Karst.; Birch, Betula spp.) was assessed by combining information from previous studies of current consumption patterns with displacement factors (DF) for structural construction, non-structural construction, and energy usage. We did not conduct additional life cycle analyses compared to the current literature. Our aim was to identify the factors that most extensively influence the displacement effect and to estimate the overall climate effect of Finnish logs in light of current production levels of mechanical forest industry. The analyses were based on information from both statistics and proprietary sources. Contrary to previous studies, we provide DFs by main tree species in Finland, which has been an unidentified area of research to date. Additionally, we apply a more detailed classification of structural and non-structural wood products. This study did not include effects on the forest carbon sink, as they depend case-wise on forest resources and forest management. According to our results, with current production and consumption trends, the average displacement effects for domestic Scots pine, Norway spruce, and birch logs were 1.28, 1.16, and 1.43 Mg C/Mg C, respectively. The corresponding overall annual displacement effect caused by the current production of sawn wood and wood-based panels was 12.3 Tg CO2 for Finland for the BAU scenario and varied between 8.6 and 16.3 Tg CO2 depending on the wood use scenario.
  • Riihimäki, Elisa (2003)
    This study analyzes the effects of the economic integration on the elasticities of labour demand. We present a linear model of intra-industry trade considering how product market integration affects labour demand. For traded goods, there is firm in each country producing with two factors of production, labour and capital, and non-traded goods are produced only with labour. In a Cournot-Nash equilibrium, we show that the various channels of integration have different effects on labour demand. A decrease in trade barriers tends to increase labour demand. However, if product market integration gives rise to an increase in the number of traded goods, we can expect labour demand to decrease. The reason behind these counteracting results is that taking better advantage of economies of scale firms expand production despite lower price-cost margins, while firms face an increase in the degree of competition in goods markets. In a non-linear model, the purpose is to analyze how economic integration changes in theory the labour-demand elasticity with own price. We suppose that, in an open economy, industries produce goods with capital and labour. We derive two different effects of an increase in the degree of integration, a scale effect and a substitution effect, on the labour-demand elasticity. If integration gives rise to an increase in substitutability, we can expect labour demand to become more elastic. We show also that international trade increases the elasticity of labour demand by increasing the elasticity of product demand. Then, integration makes labour demand more elastic either by making output markets more competitive or by making domestic labour more substitutable with foreign factors. We present a two-stage estimation model in which the aim is to investigate empirical whether integration within European Union has changed the labour-demand elasticities with own price in Finland using data from the manufacturing sector from 1975 to 1999. The more elastic labour demand is, the more sensitive employment in consequence of the change of labour costs changes. We find that the labour demand became more elastic over process of integration in manufacturing overall and in all sectors by using instrumental variables estimation, and by using ordinary least squares in manufacturing overall and in the majority of the sectors. We find also that the effects of the demand shocks on labour demand have become greater in all sectors except one. Determining European integration’s effect on the labour-demand elasticities, our second stage results provide some support for the hypothesis that integration has contributed to increase in labour-demand elasticities. The majority of the integration indicators have the predicted effect on the elasticities for manufacturing overall and for the majority of the sectors. The results provide also some evidence that the integration forces changing labour substitutability by making labour more easily substituted for foreign factors of production.
  • Poljatschenko, Victoria (Helsingin yliopisto, 2019)
    Finland has committed under Paris Agreement to limit global temperature rise to well below 2 ̊C compared to pre-industrial levels, and to reach carbon neutrality by 2035. Finnish forests have a key role in reaching these targets. Firstly, forests contribute to climate change mitigation by sequestrating carbon dioxide (CO2) from the atmosphere through photosynthesis. Secondly, forest is a valuable resource pool of renewable low carbon material that has several advantageous attributes. Long-lived harvested wood products (HWP) function as external carbon pools supporting continuous growth of biomass in the forest, and substitute for fossil-intensive material. Processing of wood material result in substantially smaller life-cycle emissions compared to its energy intensive substitutes concrete, aluminium and steel. The substitution potential of wood use is particularly significant in construction sector that caused one third of both national and global GHG emissions in 2018. In this study the substitution effect of Finnish wood products by dominant tree species was assessed by combining information on current consumption with substitution factors (SF) for structural construction, non-structural construction and energy usage from previous studies. The aim was to identify those factors that influence the substitution potential most extensively and estimate the overall climate effect of mechanical forest industry in the light of current production levels and consumption trends. Current production volumes of mechanical forest industry are averages from LUKE statistical service from 2015-2018. Proprietary information on wood use in Finland was obtained from Forecon report on use of sawn wood and wood-based panels. Contrary to previous ones, this study provides substitution factors by tree species, which has been an unidentified area of research to date. The results show that with current consumption trends, the substitution effect for pine, spruce and birch were 1.37, 1.27 and 1.04 tC / tC, respectively. This implies that every ton of carbon used in wood product result to an emission reduction of 1.04-1.37 (3.8–5 t CO2) carbon tons. Sensitivity analyses showed that the SFs for coniferous trees were highly sensitive for changes in the use of general sawn wood, which represents the largest singular product group. The substitution effect of birch was determined by its use in short-lived products. The overall substitution effect of current consumption of sawn wood and wood-based panels equals to 3.3 Mt C (12,1 MtCO2). The results imply that the external carbon stock in produced wood products (2.5 Mt C, or 9.2 MtCO2) and its substitution effect (3.2 Mt or 12.1 MtCO2) could increasingly offset the reduction in forest carbon stock (6 Mt C or 22 MtCO2) due to raw-material acquisition, if forests are managed sustainably and wood is used primary for production of long-lasting wood products.
  • Kyllönen, Juhapekka (Helsingfors universitet, 2010)
    The European Union has stated the reduction of carbon dioxide emissions as one of the major goals in its energy policy. The Emission trading system that started in year 2005 was established to create an efficient market for emission permits and to direct the emission reductions to areas where they are most cost-efficient. Finland has committed to follow the guidelines of the emission trading system and to make notable reductions to the total level of CO2 emissions. The goal of this study is to examine how the emission trading system has affected the fuel choices in the energy sector. The purpose is to find out whether there has been substitution between the different fuel types. The substitution effects were estimated by three different methods. Also this study tries to explain what type of price elasticities the different fuels have. Additionally the effect of emission permit on the allocation of different fuels is studied. The data used in this study were gathered from 67 plants over four years. The studied fuels were aggregated into three categories: wood, peat and other fuels the fourth studied variable was the price of emission permit. The data were edited in to a panel form and were analysed in statistical program EViews. Translog function form was used to solve the elasticities for different fuel types. The results indicate that during the observation period peat acted as a base load fuel with wood and other fuels acting as peaking fuels. Peat counted for half of the total fuel consumption with wood and the other fuels both having a share of about 25%. Wood and other fuels were more price sensitive and had a higher price elasticity than peat. The increase in the price of emission permits decreased the use of peat but had only minor effect on wood and other fuels. During the first period of emission trading system the fluctuation of the permit’s price was intense and the increase in the price did not have a major effect on the fuel choices in the Finnish energy sector. The second period started in 2008 and only one year of that period was included in this study, so it is still to yearly to make any further interpretations of how the second period has effected on the fuel choices. For future studies, in the field of interfuel substitution and price elasticity, a longer time period and a data set with more plants and more fuel types could offer more accurate results and would give more insight to how the plants react to the changing conditions.