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

Matteo Alpino (), Luca Citino and Annalisa Frigo ()
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Matteo Alpino: Bank of Italy
Annalisa Frigo: Bank of Italy

No 776, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

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.

Keywords: energy crisis; price-elasticity of energy demand (search for similar items in EconPapers)
JEL-codes: Q41 (search for similar items in EconPapers)
Date: 2023-06
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (4)

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