each firm we impute the volume of electricity and natural gas that it consumes by multiplying its output, as recorded in our data, by the average level of energy-intensity of the sector in which the firm operates. Based on this inferred consumption, we assign firms to Eurostat end-user price bands for electricity and natural gas. For model estimation, all prices are represented as indices, based on real 2007 values.

Using information in our data set we can account for the level of utilization of fuel-using capital stocks ( _Ui,j,t_ ). For each firm in the data we observe its fuel inventories at the beginning and at the end of each year.<sup>5</sup> Based on these data we calculate an average annual fuel utilization rate. This is given by taking the total fuel consumption in that period - which is the sum of the value of opening stocks plus fuel purchases minus closing stocks, and dividing this by the total value of fuel available for consumption - the sum of opening stocks plus purchases.

# **3.2 Calculation and disaggregation of fuel-using capital stocks**

The census asks firms for information on capital acquisitions by type of capital. Capital acquisitions data are disaggregated as follows: acquisitions of computer equipment; computer software; plant machinery and equipment; motor vehicles; building and construction work; buildings purchased; land purchased; capitalized R&D, and “other”. In our analysis we focus on the plant machinery and equipment component of capital, where substitution between different types of fuel-using stocks is technologically feasible. Capital stocks are calculated using the perpetual inventory method and based on capital acquisitions and disposals, as recorded in the data. The starting stocks are calculated based on the CSO’s industry-level breakdown for the previous year and then subsequently disaggregated to the firm level using each firm’s share of fuel use in total industry-level fuel use. A detailed description of how this variable is created, including information on depreciation rates and assumed assets lives, is provided by Haller (2014) and Haller and Hyland (2014).

For our analysis, we are interested in the machinery and equipment component of capital stocks, disaggregated by type of capital - where type refers to the fuel used. To break down the machinery and equipment component by fuel used we follow Steinbuks (2012) and use data from the TIMES model for Ireland (Gallach ́oir et al., 2012). We calculate five components of equipment based on the TIMES data, they are: those that can only run on electricity (for example, electrical motors and refrigeration units); those that run on electricity, but where other fuels can be used (for example high- and low-temperature heating processes)<sup>6</sup> ; those that run on natural gas; those that run on oil; and those that run on coal.<sup>7</sup> Average sectoral-level capital stocks in 2004 (the first year of our data) for each of the five subcomponents are given in Table 1.

> 5This information is available for the sum of all fuels, but not disaggregated by fuel type.

> 6These are referred to as “Electricity (no substitution possible)” and “Electricity (substitution possible)” respectively in Table 2.

> 7For machinery that runs on natural gas, oil or coal, we assume other fuel options are always available for these processes.

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