Substitution possibilities of energy and non-energy factors in Pakistan: A trans-log production function approach

Abstract

Pakistan meets nearly one-third of its energy needs through imported energy resources i.e. coal, oil and Liquefied Natural Gas (LNG). Despite significant investments in energy infrastructure (especially in power generation projects), Pakistan continues to be energy insecure. This study attempts to analyze the substitution possibilities within energy sources, and between energy and non-energy factors by using a trans-log production function. The results show positive substitution between labor-energy and capital-energy which means improved skills and knowhow could result in energy conservation. Moreover, substitution of oil by gas in Pakistan will be highly encouraging as such substitution will address the issue of heavy import bill.