Interfuel substitution, hydroelectricity consumption and CO2 emissions mitigation in Malaysia: evidence from a transcendental logarithm (trans-log) cost function framework

• Published in: Environmental science and pollution research international Vol. 27; no. 14; pp. 17162 - 17174
• Main Authors: Bello, Mufutau Opeyemi, Solarin, Sakiru Adebola, Yen, Yuen Yee
• Format: Journal Article
• Language: English
• Published: Berlin/Heidelberg Springer Berlin Heidelberg 01.05.2020; Springer Nature B.V
• Subjects: Aquatic Pollution; Atmospheric Protection/Air Quality Control/Air Pollution; Carbon dioxide; Carbon dioxide emissions; Cost function; Earth and Environmental Science; Econometrics; Ecotoxicology; Electricity; Emissions; Emissions control; Environment; Environmental Chemistry; Environmental Health; Environmental science; Fossil fuels; Fuels; Hydroelectric power; Hydroelectricity; Natural gas; Parameter estimation; Renewable energy; Research Article; Substitutes; Waste Water Technology; Water Management; Water Pollution Control; Malaysia; Hydropower; emission mitigation; Interfuel substitution; Trans-log cost function; Malaysia; Seemingly unrelated regression (SUR); CO
• ISSN: 0944-1344; 1614-7499
• DOI: 10.1007/s11356-020-08251-z

The main objective of this paper is to estimate the interfuel substitution elasticities between hydropower and the fossil fuels of coal and natural gas used in the generation of electricity for Malaysia. Due to the violation of the assumption behind the ordinary least squares (OLS) method on account of the correlated error terms in the system of equations, the econometrics techniques of seemingly unrelated regression (SUR) was adopted to obtain the parameter estimates using dataset that covers the period 1988 to 2016. The main finding is that there exists substantial substitution possibility between hydropower and fossil fuels in the generation of electricity for Malaysia. CO 2 emissions mitigation scenarios were also conducted to explore the possible effects of substituting fossil fuels for hydropower to generate electricity. The results show that switching from high carbon-emitting fuels to renewable energy such as hydropower will substantially reduce CO 2 emission and assist the country towards achieving the carbon emissions reduction targets. Policy recommendations are offered in the body of the manuscript.