Publication detail

Responsiveness to Energy Price Changes when Salience is High: Residential Natural Gas Demand in Ukraine

Author(s): Olha Khymych , Alberini Anna
Mgr. Milan Ščasný PhD., Alberini Anna
Type: Articles in journals with impact factor
Year: 2020
Number: 144
ISSN / ISBN:
Published in: Energy Policy
Publishing place:
Keywords: consumer demand; residential gas; price elasticity
JEL codes:
Suggested Citation: Alberini, A., Khymych, O., Ščasný, M. (2020), Responsiveness to Energy Price Changes when Salience is High: Residential Natural Gas Demand in Ukraine. Energy Policy, 144, art. no. 111534, https://doi.org/10.1016/j.enpol.2020.111534
Grants: Frontiers in Energy Efficiency Economics and Modelling - FE3M
Abstract: Despite its importance for policy purposes, evidence about the price elasticity of natural gas demand in the residential sector is very limited and based on inference from situations with modest variation in prices. We focus on a locale and time when price changes were extreme and salient to consumers, namely Ukraine between 2013 and 2017. We exploit the tariff reforms and detailed micro-level household consumption records to assess whether consumers adjust their consumption in response to the rate changes and estimate the price elasticity of the demand for natural gas. To isolate behaviour, attention is restricted to those households that made no structural energy-efficiency upgrades to their homes, thus keeping the stock of gas-using capital fixed. We find that households are capable of reducing consumption, even without installing insulation or making any other structural modifications to their homes. The price elasticity is about -0.16. Wealthier households, people living in multifamily buildings, and heavy users have more inelastic demands. Households reduced consumption even when they received government assistance. This, and the fact the demand is inelastic, especially for wealthier households, bode well for tariffs or energy tax schemes where wealthier households subsidize the consumption of the poorer ones.

Partners

Deloitte

Sponsors

CRIF
McKinsey
Patria Finance
Česká Spořitelna
EY