Energy substitution effect on transport industry of China-based on trans-log production function

• We examine energy-other factor substitution in China's transport industry.
• Input factors of capital, energy and labor are chosen in trans-log production model.
• Output elasticities of all the three input factors are increasing year by year.
• All input pairs are substitutes as their elasticity estimates tend to be positive.

China is currently in the stage of industrialization and urbanization, which is characterized by rigid energy demand and rapid growth of energy consumption. China's transport industry is of high energy consumption and high pollution. Therefore, energy issues in the industry are particularly of concern to all parties. In this paper, a trans-log production function model for China's transport industry is established and input factors of capital, energy and labor are included. Output elasticity of each factor and substitution elasticity between the variables are analyzed. Results show that: during the period 1980–2010, there is a relatively high elasticity of substitution (the value is around 1.05–1.07) between energy factor and labor factor in China's transport sector; significant elasticity of substitution between capital factor and energy factor exists as well (the value is about 0.98–1.00). It suggests that the substitution between energy and labor could be achieved by continuously upgrading technology. Through allocating more capital into transport industry, relevant energy saving technology could be continuously promoted and the substitution between capital and energy will also be realized. The transition of Chinese transport industry from labor-intensive to capital-intensive is a significant trend.