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

Milan Ščasný (), Evžen Kočenda, Samuel Eshun and Princewill Okwoche

No 2025/11, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

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.

Keywords: Energy demand; cross-sectoral dependency; income elasticity; price elasticity (search for similar items in EconPapers)
JEL-codes: C23 O52 Q41 Q43 Q48 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2025-06, Revised 2026-06
New Economics Papers: this item is included in nep-eec, nep-ene and nep-tra
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