Flexible versus designated technologies and interfuel substitution

Zero demands for some types of energy are frequently observed in firm level data sets. To deal with this problem, two alternative solutions are retained in the literature: firstly, it can be assumed that the consumption of some kinds of energy is not allowed by the existing technology; secondly one can suppose that firms decide to use only some of the different kinds of energy allowed by the technology. In this paper we estimate the interfuel substitutions resulting from these two different situations. We take into account that increasing the price of an energy form possibly modifies the number of energy used by the firm. 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.