| Abstract: | In this paper we estimate a flexible form cost function of the aluminium industry in the USA and use our estimates to obtain derived demand curves for aluminium inputs such as electricity and bauxite. We then calculate the welfare gains arising from decreased energy use when the level of secondary recycling is increased. The process is repeated for several model specifications. All of our tests, however, yield similar results and indicate that substitution of scrap for only 5% of the bauxite presently used in US aluminium manufacturing would result in annual savings of close to a quarter of a billion dollars. |
