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Final energy demand in Portugal: How persistent it is and why it matters for environmental policy

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Author Info

  • Alfredo Marvão Pereira

    ()
    (Department of Economics, College of William and Mary, Williamsburg, VA, USA and Center for Advanced Studies in Economics and Econometrics CASEE, Portugal)

  • José Manuel Belbute

    ()
    (Department of Economics, University of Évora, Portugal Center for Advanced Studies in Management and Economics CEFAGE, Portugal)

Abstract

The objective of this paper is to analyze the degree of persistence of final energy demand in Portugal. Our results suggest the presence of a strong level of persistence for aggregate final energy demand. Final demand for gas is the most persistent component of energy demand, while the final demand for coal is the least persistent. In turn, final demand for petroleum and biomass tend to have levels of persistence similar to aggregate final demand. The case of final demand for electricity is inconclusive. These results have the important implication for the design of environmental policies. First, the fact that final energy demand is highly persistent is good news in that environmental policies in Portugal can be implemented in a favorable setting in which their effects will tend to be long lasting. Second, the high persistence of gas and the fact that biomass and petroleum have levels of persistence that are similar suggests that fuel switching policies will be relatively easy to implement in these cases. The case of coal is somewhat different in that switching away from coal may not be easy. In turn, the case of electricity is somewhat ambiguous. While the fact that it is also highly persistent suggests that shocks to its final demand will produce long lasting effects, it is not clear, however, how they compare to the effects on the other final demand components and therefore we can make no statements about fuel switching.

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Bibliographic Info

Paper provided by University of Evora, CEFAGE-UE (Portugal) in its series CEFAGE-UE Working Papers with number 2011_20.

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Length: 19 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:cfe:wpcefa:2011_20

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Keywords: Persistence; final energy demand; fuel switching; environmental policy; Portugal.;

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Cited by:
  1. Smyth, Russell, 2013. "Are fluctuations in energy variables permanent or transitory? A survey of the literature on the integration properties of energy consumption and production," Applied Energy, Elsevier, Elsevier, vol. 104(C), pages 371-378.
  2. Belbute, José, 2013. "Does final demand for energy in Portugal exhibit long memory?," MPRA Paper 45717, University Library of Munich, Germany.
  3. Hooi Hooi Lean & Russell Smyth, 2012. "Are fluctuations in production of renewable energy permanent or transitory?," Development Research Unit Working Paper Series, Monash University, Department of Economics 05-12, Monash University, Department of Economics.

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