Flexible versus Designated Technologies and Interfuel Substitution

Zero demands for some types of energy are frequently observed in …rm level data sets. To deal with this problem, two alternative solutions are retained in the literature: …rstly, it can be assumed that the consumption of some kinds of energy is not allowed by the existing technology; secondly one can suppose that …rms decide to use only some of the di¤erent kinds of energy allowed by the technology. In this paper we estimate the inter-fuel substitutions resulting from these two di¤erent situations. We take into account that increasing the price of an energy form possibly modi…es the number of energy used by the …rm. We show that even in this case an estimation of the elasticity of substitution can be obtained. The empirical results are based on a French manufacturing energy consumption survey