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Price and Output Elasticities of Industrial Energy Demand in New EU Member States

Author

Listed:
  • Milan Scasny

    (Institute of Economic Studies, Charles University, Prague, Czech Republic; Environment Centre, Charles University, Prague, Czech Republic)

  • Evzen Kocenda

    (Institute of Economic Studies, Charles University, Prague, Czech Republic; Environment Centre, Charles University, Prague, Czech Republic; CESifo Munich; IOS Regensburg)

  • Samuel Fiifi Eshun

    (Institute of Economic Studies, Charles University, Prague, Czech Republic)

  • Princewill Okwoche

    (Environment Centre, Charles University, Prague, Czech Republic; Namibia University of Science and Technology, Windhoek, Namibia; School of Economics, University of Cape Town)

Abstract

We estimate industrial energy demand elasticities for eleven new EU member states using country-sector panel data for ten industrial sectors over 1995–2018. The analysis examines the effects of energy prices, sectoral output, energy-saving investment, and R&D while accounting for slope heterogeneity, cross-sectional dependence, and dynamic adjustment. Diagnostic tests support heterogeneous estimators, and the Dynamic Common Correlated Effects Mean Group model is our preferred specification. The results show that industrial energy demand is price responsive but inelastic: the preferred baseline yields a short-run price elasticity of -0.29 and a long-run elasticity of -0.40. Output increases energy use, with short-run and long-run elasticities of 0.16 and 0.22, respectively. Energy demand is persistent, while energy-saving investment has no robust direct effect. R&D shows limited energy-reducing effects. The findings support predictable long-term price-based policies complemented by targeted efficiency and innovation measures.

Suggested Citation

  • Milan Scasny & Evzen Kocenda & Samuel Fiifi Eshun & Princewill Okwoche, 2025. "Price and Output Elasticities of Industrial Energy Demand in New EU Member States," Working Papers IES 2025/11, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2026.
    • Handle: RePEc:fau:wpaper:wp2025_11
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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