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 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.

Bibliographic Details

Main Author:	Iimi, Atsushi
Language:	English en_US
Published:	World Bank, Washington, DC 2010-01
Subjects:	ADMINISTERED PRICE, ADVERSE EFFECT, AGGREGATE LEVEL, APPROACH, AVAILABILITY, AVERAGE PRICE, BALANCE, CAPACITY OF ELECTRICITY, CEMENT, CHEAPER ENERGY, CHEMICAL MANUFACTURING, COMMERCE, COMMERCIAL DEMAND, COMMODITY PRICES, COMPETITIVENESS, CONDITIONAL DEMAND, CONSUMPTION OF ENERGY, COOKING, COST FUNCTIONS, COST INCREASES, CRUDE OIL, CRUDE OIL PRICE, DECLINE IN ENERGY CONSUMPTION, DEMAND CURVE, DEMAND DECLINES, DEMAND ELASTICITY, DEMAND FOR ELECTRICITY, DEMAND FOR ENERGY, DEMAND FUNCTION, DEVELOPMENT STRATEGY, DOMESTIC ENERGY, DOMESTIC ENERGY SUPPLY, DOMESTIC MARKET, ECONOMETRICS, ECONOMIC COMPETITIVENESS, ECONOMIC EFFICIENCY, ECONOMIC STRUCTURE, ECONOMIC STRUCTURES, ECONOMIC THEORY, ECONOMIES OF SCALE, EFFICIENCY IMPROVEMENT, ELASTICITY OF SUBSTITUTION, ELECTRICAL TRANSFORMERS, ELECTRICITY, ELECTRICITY CONSUMPTION, ELECTRICITY GENERATION, ELECTRICITY GENERATION CAPACITY, ELECTRICITY PRICE, ELECTRICITY PRICES, ELECTRICITY PRODUCTION, ELECTRICITY SECTOR, ELECTRICITY SUPPLY, ELECTRICITY TARIFF, ELECTRICITY TARIFFS, EMPLOYMENT, END USERS, END-USE, END-USERS, ENERGY ALTERNATIVES, ENERGY BALANCE, ENERGY CONSUMERS, ENERGY CONSUMPTION, ENERGY COSTS, ENERGY CRISIS, ENERGY DEMAND, ENERGY DEMAND ELASTICITIES, ENERGY EFFICIENCY, ENERGY EXPENDITURE, ENERGY INPUT, ENERGY INTENSIVE, ENERGY MARKET, ENERGY MARKETS, ENERGY POLICIES, ENERGY POLICY, ENERGY PRICE, ENERGY PRICES, ENERGY SECURITY, ENERGY SOURCE, ENERGY SOURCES, ENERGY SUPPLY, ENERGY USE, ENERGY USERS, ENERGY-EFFICIENT DEVICES, EXCESS SUPPLY, EXPENDITURES, EXPORTS, FACTOR DEMAND, FACTOR PRICE, FACTOR PRICES, FUEL, FUEL CONSUMPTION, FUEL PRICE, FUELS, GDP, GENERATION, GENERATION CAPACITY, HIGH ENERGY INTENSITY, HIGH ENERGY PRICES, HOT WATER, HYDROPOWER, HYDROPOWER GENERATION, IMPROVING ENERGY EFFICIENCY, INCOME, INDUSTRIAL ELECTRICITY PRICE, INDUSTRIAL ENERGY CONSUMPTION, INEFFICIENCY, INPUT PRICES, INTERNATIONAL NATURAL GAS, MAJOR ENERGY SOURCE, MARKET CONDITION, MARKET PRICES, MARKET REFORMS, MARKET STRUCTURE, NATURAL GAS, OIL CRISIS, POTENTIAL DEMAND, POWER, POWER CONSUMPTION, POWER PLANTS, POWER SECTOR, POWER STATIONS, POWER SYSTEM, PRICE ADJUSTMENT, PRICE ADJUSTMENTS, PRICE CHANGE, PRICE CHANGES, PRICE DISCRIMINATION, PRICE ELASTICITIES, PRICE ELASTICITY, PRICE ELASTICITY OF DEMAND, PRICE ELASTICITY OF ENERGY DEMAND, PRICE INCREASES, PRICE LEVEL, PRICE OF ELECTRICITY, PRICE POLICY, PRICES OF COAL, PRICING POLICY, PRIMARY ENERGY, PRIMARY ENERGY SUPPLY, PRODUCT QUALITY, PRODUCTION COSTS, PRODUCTION LEVELS, PUBLIC UTILITIES, RESIDENTIAL CONSUMERS, RESIDENTIAL CUSTOMERS, RESIDENTIAL DEMAND, RESIDENTIAL ELECTRICITY, RESIDENTIAL ENERGY, RESIDENTIAL ENERGY DEMAND, RETAIL, RETAIL PRICES, SCALE EFFECT, SECURITY OF ENERGY SUPPLY, SPOT PRICE, SUBSTITUTION, SUBSTITUTION EFFECT, SUPPLY COST, SUPPLY CURVE, TELECOMMUNICATIONS, TOTAL COSTS, TOTAL SALES, TRANSITION ECONOMIES, TRANSMISSION CAPACITY, TRANSMISSION LOSSES, UTILITIES, VERTICAL LINE, VOLATILITY, VOLTAGE, WAGES,
Online Access:	http://documents.worldbank.org/curated/en/2010/01/11617936/price-elasticity-nonresidential-demand-energy-south-eastern-europe https://hdl.handle.net/10986/19951
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