Industrial activities account for a significant share of global energy consumption and carbon emissions, so understanding the elasticity of substitution between fuels in the industrial sector is crucial for designing effective energy and environmental policies. This study examines the ease of substitution among different energy inputs – natural gas, electricity, diesel, and fuel oil – used by industrial firms in Saudi Arabia. To quantify the responsiveness of fuel switching to changes in relative fuel prices, we employ a flexible translog functional form, ensuring that the estimated models satisfy essential conditions such as positivity, monotonicity, and curvature.
