A meta-analysis on the price elasticity of energy demand

Abstract

Price elasticities of energy demand have become increasingly relevant in estimating the socioeconomic and environmental effects of energy policies or of other events with influence on the prices of energy goods. Since the 1970s a large number of academic papers have provided both short and long-term price elasticity estimates for different countries by using several models, data and estimation techniques. Yet the literature offers a rather wide range of estimates for the price elasticities of demand for energy. This paper quantitatively summarizes the recent, but still sizeable, empirical evidence on this matter to facilitate a sounder economic assessment of energy price changes. It does so by using meta-analysis to identify the main factors affecting the elasticity results, both short and long term, for energy in general as well as for specific products: electricity, natural gas, gasoline, diesel and heating oil. JEL Classification: C13, C83, Q41This piece of research carries out a meta-analysis with the procedure suggested by Nelson and Kennedy (2009) using the methodology of regression analysis (see also Stanley and Jarrell, 1989), that is, it performs a regression analysis employing the entire set of results selected from the literature and an extensive specification of the factors that determine these elasticities. The paper thus responds to the need to determine, as precisely as possible, the value of price elasticities of demand for energy in general as well as those for the demand of the abovementioned energy goods. As a secondary * . How sensitive to time period sampling is the asymmetric price response specification in energy demand modelling? Energy Economics, 40, 90-109. Agnolucci, P., 2009. The energy demand in the British and German industrial sectors: Heterogeneity and common factors. Energy Economics, 31, 175-187. Agostini, P., Botteon, M., Carraro, C., 1992. A carbon tax to reduce CO 2 emissions in Europe. Energy Economics, 14, 279-290. Ahmadian, M., Chitnis, M., Hunt, L.C., 2007. Gasoline demand, pricing policy and social welfare in the Islamic Republic of Iran, 31, 105-124.Ajanovic, A., Haas, R., 2012. The role of efficiency improvements vs. price effects for modeling passenger car transport demand and energy demand.

Efficiency of Energy Taxes and the Validity of the Residential Electricity Environmental Kuznets Curve in the European Union

“…Labandeira and coworkers' [17] meta-analysis of studies, also from around the world, reports a lower mean short-run price elasticity of electricity demand of -0.21 and a mean long-run elasticity of -0.67 for the period 1990-2014. This paper shows that the own long-run price elasticities hover around −0.85 (−0.8 in Model 5 and −0.9 in Model 6).…”

“…In the early 1920s, according to Bye and Bruvoll [25], Franck Ramsey already said that such taxation should be put on the least elastic goods to minimize the efficiency losses. Since energy goods generally show a low elasticity of demand [17], they are considered as suitable goods for taxation.…”

“…Sensitivity of electricity demand to prices and income has been extensively studied (see [17]). However, studies aiming to directly explore the efficiency of energy taxes are missing, particularly those based on the EEKC hypothesis.…”

Determinant of Pertamax Fuel Demand in Purwokerto

“…So, it means that variable vehicle type (D 5 ) is the dominant variable that has biggest contribution to dependent variable. It is because car tank will need more fuel than motorcycle so the demand of car is higher than motorcycle (Labandeira, Labeaga, & López-otero, 2017). The value of elasticity at means of these two variable are < 1, it means that this variable is inelastic, in other word the change in income and vehicle type will not affecting much to the demand of fuel because fuel is a kind of goods that will always needed for everyone.…”

Power markets in transition: Decarbonization, energy efficiency, and short-term demand response

“…Observe from Equation (7) that s i is defined as an own-price elasticity of demand. Thus, the magnitude of the increase is determined by an exogenously given price elasticity, which is obtained from empirical studies (e.g., [46]). 16 Demand Shifting.…”