Model for Investigating Substitution Effect between Renewable Resources and Non-Renewable Resources

Abstract

Abstract-This paper is mainly about investigating the substitution effect between renewable resources and nonrenewable resources. Firstly, the paper will give a review about previous empirical analysis about the relationship between the two resources. Then, the substitution effect will be analyzed by building a model which is based on reducing form of demand and supply function for gasoline market. This model can be combined with time series data in different countries and appropriate time series test to discover the substitution effect for both resources. The accurate analysis for this substation effect can give government appropriate guidance in terms of reducing greenhouse effect on increasing the usage of renewable resources.