Households' energy demand and the effects of carbon pricing in Italy

Ivan Faiella and Luciano Lavecchia

No 614, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper proposes a novel methodology to estimate the demand and elasticity of electricity, heating, and private transport fuels by aligning the microdata of the Italian Household Budget Survey with several external sources. These estimates are used to evaluate the effects of a set of one-off carbon taxes on energy demand and expenditure. According to our simulations, the increase in energy prices prompted by carbon taxation would decrease energy demand for all uses considered. Our simulations suggest that the effects of carbon taxation are generally regressive: expenditure would increase more for poorer households while their energy demand is compressed. The carbon tax could achieve a significant decrease in GHG emissions and raise revenues, which could be recycled to compensate vulnerable households or reinvested to support the energy transition.

Keywords: household energy demand; Italy; climate change; carbon tax; energy poverty (search for similar items in EconPapers)
JEL-codes: Q41 Q54 Q58 (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-cwa, nep-ene, nep-env, nep-reg and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_614_21

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