Price Elasticity of Nonresidential Demand for Energy in South Eastern Europe
Recent volatility in international energy prices has revealed South Eastern Europe as one of the most vulnerable regions to such external shocks. Under the current global economic downturn, in addition, the region s energy-intensive industries are...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2010/01/11617936/price-elasticity-nonresidential-demand-energy-south-eastern-europe http://hdl.handle.net/10986/19951 |
| Summary: | Recent volatility in international
energy prices has revealed South Eastern Europe as one of
the most vulnerable regions to such external shocks. Under
the current global economic downturn, in addition, the
region s energy-intensive industries are faced with the
challenge of the weakening demand for their outputs. This
paper casts light on the relationship between the price and
the demand for energy. Based on firm level data, it is shown
that the price elasticity of industrial energy demand is
about -0.4 on average. There are a number of data issues to
interpret the results correctly. But Albania and Macedonia
are systematically found to have a relatively elastic demand
for energy on the order of -0.7 to -0.8. In these countries,
therefore, price adjustments would be one of the effective
policy options to balance demand with supply during the
period of energy crisis. In other countries, the demand
response would be much weaker; pricing cannot be the only
solution. Other policy measures, such as facilitation of
firm energy efficiency and improvements in the quality of
infrastructure services, may be required. |
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