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Dynamic and Static Behaviour with Respect to Energy Use and Investment of Dutch Greenhouse Firms

Verreth, D. M. I., Emvalomatis, G., Bunte, F., Oude Lansink, A. G. J. M.
Environmental and resource economics 2015 v.61 no.4 pp. 595-614
capital, carbon dioxide, electricity, emissions, energy, energy use and consumption, greenhouse gases, greenhouses, horticulture, models, prices, Netherlands
Dutch greenhouse horticulture firms are energy-intensive and major emitters of greenhouse gases. This paper develops a theoretically consistent model that is able to describe the greenhouse firms’ behaviour regarding energy use and investments in energy technology. The behaviour of the firm is modelled using a combination of a dynamic cost function and a static profit function framework. The optimal quantity of energy is derived from the link between these two functions. The model is applied to a panel of 97 Dutch greenhouse firms over the period 2001–2008. The results show that most Dutch greenhouse firms shift from being net electricity users to net electricity producers in the long term. Investing in energy capital contributes to reducing net energy use, however it increases the quantity of carbon dioxide emissions due to an increase in electricity production. A 1 % increase of the price of gas reduces carbon dioxide emissions by 1.6 %.