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The effects of the 2021 energy crisis on medium-sized and large industrial firms: evidence from Italy

Author

Listed:
  • Matteo Alpino

    (Bank of Italy)

  • Luca Citino

    (Bank of Italy)

  • Annalisa Frigo

    (Bank of Italy)

Abstract

Using survey data from Italy, we study the effects of the 2021 energy crisis on the energy input choices of medium and large-sized industrial firms. Our instrumental variable (IV) strategy, based on the availability of fixed-price contracts subscribed before the crisis, reveals an average infra-annual price elasticity of demand very close to zero for both electricity and natural gas. Large energy consumers subject to the European Emission Trading System (EU ETS) have significantly larger natural gas elasticities and were able to partially substitute gas with other fossil fuels. Surprisingly however, their elasticity to electricity prices is similar to that of other firms. We finally show that in 2021 energy-intensive and EU ETS firms increased their final prices more than other firms, but this differential effect was mitigated by the presence of fixed-price contracts. Our evidence is valid for 2021 but does not necessarily extend to 2022.

Suggested Citation

  • Matteo Alpino & Luca Citino & Annalisa Frigo, 2023. "The effects of the 2021 energy crisis on medium-sized and large industrial firms: evidence from Italy," Questioni di Economia e Finanza (Occasional Papers) 776, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_776_23
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    Cited by:

    1. Francesco Corsello & Marco Flaccadoro & Stefania Villa, 2023. "Quantity versus price dynamics: the role of energy and bottlenecks in the Italian industrial sector," Questioni di Economia e Finanza (Occasional Papers) 781, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    energy crisis; price-elasticity of energy demand;

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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