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

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  • Alfredo Marvão Pereira

    ()
    (Department of Economics, The College of William and Mary)

  • José Manuel Belbute

    ()
    (Department of Economics, University of Evora)

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 at the aggregate level with demand for gas as the most persistent component and demand for coal as the least persistent. In turn, final demands for petroleum and biomass have levels of persistence similar to aggregate demand. The case of electricity is inconclusive. These results have important implications for the design of environmental policy. First, the fact that final energy demand is highly persistent means that the effects of environmental policies 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. Switching away from coal, however, may not be easy. Finally, the case of electricity is ambiguous.

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Bibliographic Info

Paper provided by Department of Economics, College of William and Mary in its series Working Papers with number 109.

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Length: 17 pages
Date of creation: 23 Jul 2013
Date of revision:
Handle: RePEc:cwm:wpaper:109

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

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References

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  1. Carlos Robalo Marques, 2005. "Inflation persistence: facts or artefacts?," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  2. Gil-Alana, Luis A. & Loomis, David & Payne, James E., 2010. "Does energy consumption by the US electric power sector exhibit long memory behavior?," Energy Policy, Elsevier, vol. 38(11), pages 7512-7518, November.
  3. Dias, Daniel A. & Marques, Carlos Robalo, 2010. "Using mean reversion as a measure of persistence," Economic Modelling, Elsevier, vol. 27(1), pages 262-273, January.
  4. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
  5. Timothy Cogley & Giorgio E. Primiceri & Thomas J. Sargent, 2010. "Inflation-Gap Persistence in the US," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 43-69, January.
  6. Lee, Chien-Chiang & Chang, Chun-Ping, 2005. "Structural breaks, energy consumption, and economic growth revisited: Evidence from Taiwan," Energy Economics, Elsevier, vol. 27(6), pages 857-872, November.
  7. Paresh Kumar Narayan & Russell Smyth, 2005. "Are Shocks To Energy Consumption Permanent Or Temporary? Evidence From 182 Countries," Development Research Unit Working Paper Series 06/05, Monash University, Department of Economics.
  8. Mishra, Vinod & Sharma, Susan & Smyth, Russell, 2009. "Are fluctuations in energy consumption per capita transitory? Evidence from a panel of Pacific Island countries," Energy Policy, Elsevier, vol. 37(6), pages 2318-2326, June.
  9. Lee, Chien-Chiang & Chang, Chun-Ping, 2008. "Energy consumption and economic growth in Asian economies: A more comprehensive analysis using panel data," Resource and Energy Economics, Elsevier, vol. 30(1), pages 50-65, January.
  10. Al-Iriani, Mahmoud A., 2006. "Energy-GDP relationship revisited: An example from GCC countries using panel causality," Energy Policy, Elsevier, vol. 34(17), pages 3342-3350, November.
  11. Lean, Hooi Hooi & Smyth, Russell, 2009. "Long memory in US disaggregated petroleum consumption: Evidence from univariate and multivariate LM tests for fractional integration," Energy Policy, Elsevier, vol. 37(8), pages 3205-3211, August.
  12. Altinay, Galip & Karagol, Erdal, 2004. "Structural break, unit root, and the causality between energy consumption and GDP in Turkey," Energy Economics, Elsevier, vol. 26(6), pages 985-994, November.
  13. Jonathan L. Willis, 2003. "Implications of structural changes in the U.S. economy for pricing behavior and inflation dynamics," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 5-27.
  14. Narayan, Paresh Kumar & Smyth, Russell, 2005. "Electricity consumption, employment and real income in Australia evidence from multivariate Granger causality tests," Energy Policy, Elsevier, vol. 33(9), pages 1109-1116, June.
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Cited by:
  1. Russell Smyth, 2012. "Are fluctuations in energy variables permanent or transitory? A survey of the literature on the integration properties of energy consumption and production," Development Research Unit Working Paper Series 04-12, Monash University, Department of Economics.
  2. Hooi Hooi Lean & Russell Smyth, 2012. "Are fluctuations in production of renewable energy permanent or transitory?," Development Research Unit Working Paper Series 05-12, Monash University, Department of Economics.
  3. Belbute, José, 2013. "Does final demand for energy in Portugal exhibit long memory?," MPRA Paper 45717, University Library of Munich, Germany.

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