Search

Empirical evidence on households' awareness of electricity prices and potentially divergent demand responses to price changes conditional on price knowledge is scant. Using panel data originating from Germany's Residential Energy Consumption Survey (GRECS), we fill this void by employing an instrumental-variable (IV) approach to cope with the endogeneity of the consumers' tariff choice. By additionally exploiting information on the households' knowledge about power prices, we combine the IV approach with an Endogenous Switching Regression Model to estimate price elasticities for two groups of households, finding that only those households that are informed about prices are sensitive to price changes, whereas the electricity demand of uninformed households is entirely price-inelastic. Based on these results, to curb the electricity consumption of the household sector and its environmental impact, we suggest implementing low-cost information measures on a large scale, such as improving the transparency of tariffs, thereby increasing the saliency of prices. Keywords: Price Elasticity, Switching Regression Model, Information, 1. INTRODUCTION Recent evidence from experimental economics indicates that the sluggishness of consumers' response to price changes may be due to insufficient price knowledge (Jessoe and Rapson, 2014). Ignoring this [...]

As of late 2008, the steady decline of U.S. crude oil production over the last decades was reversed by the increased adoption of the hydraulic fracturing ('fracking') technology. Adapting the supply-side model proposed by Kaufmann et al. (2004) to assess OPEC's ability to influence real oil prices, this paper investigates the effect of the increase in U.S. oil production due to fracking on world oil prices. Among our key results obtained from (dynamic) OLS estimations, there is a statistically significant negative long-run relationship between increased U.S. oil production and oil prices. Keywords: Dynamic OLS, Error Correction Model, Shale Oil, 1. INTRODUCTION Since the outset of the new millennium, the global oil market has experienced significant changes: Due to the surge of petroleum consumption from emerging countries, world crude oil [...]

This paper presents evidence that the accumulating cost of Germany's ambitious plan to transform its system of energy provision--the so-called Energiewende--is butting up against consumers' willingness-to-pay (WTP) for it. Following a descriptive presentation that traces the German promotion of renewable energy technologies since 2000, we draw on two stated-preference surveys conducted in 2013 and 2015 that elicit the households' WTP for green electricity. Two models are estimated, one based on a closed-ended question framed around Germany's target of 35% renewable energy in electricity provision by 2020, and the other on an open-ended format that captures changes in WTP over time. To deal with the bias that typifies hypothetical responses, the models distinguish respondents according to whether they express definite certainty in their reported WTP. The results from both models reveal a strong contrast between the households' general acceptance of supporting renewable energy technologies and their own WTP for green electricity. Keywords: Certainty approach, Energy policy, Willingness-to-pay, 1. INTRODUCTION In recent years, the political economy of electricity provision in Germany has been strongly influenced by two factors. The first is the country's ongoing commitment to increase the [...]

Rebound effects measure the behaviorally induced offset in the reduction of energy consumption following efficiency improvements. Using panel estimation methods and household travel diary data collected in Germany between 1997 [...]

Using a panel of household travel diary data collected in Germany between 1997 and 2005, this study assesses the effectiveness of fuel efficiency improvements by estimating the rebound effect, which [...]

The measures taken by European governments to increase consumption of biofuels with relation to its environmental policy are analyzed.

An instructive survey of the origin of substitution measures and the trinity of empirical substitution elasticities (AES), cross-price elasticities, and the Morishima elasticities of substitution (MES) is provided. Data set of US manufacturing by Berndt and Wood's is used to illustrate why assessment of energy-price policies would be better based on cross-price elasticities like the energy-price elasticity of capital rather than on AES or MES.

Any serious empirical study of factor substitutability has to allow the data to display complementarity as well as substitutability. The standard approach reflecting this idea is a translog specification--this is [...]

Byline: Manuel Frondel, Dirk Rubbelke Efficiency improvements of technology are said to be one of the most important possibilities to satisfy the energy requirements of a growing global population and to mitigate adverse energy-related environmental impacts, such as climate change, at the same time. On the basis of the classical concept of first-law efficiency, however, conventional energy analyses lead to the impression that efficiency improvement potentials are almost exhausted. This paper explains why prevailing energy conversion efficiencies are grossly overestimated when measured in terms of first-law efficiencies. Using a stylised example, we compare the concepts of first-law and second-law efficiency. Our comparison indicates that estimates of current efficiency improvement potentials depend heavily upon the efficiency concept employed. In fact, there still seems to be much scope for efficiency improvements.

Byline: Manuel Frondel, Kristina Oertel, Dirk Rubbelke This paper provides a concise summary of the natural and the anthropogenic greenhouse effect and the major causes for climate change. This summary may be particularly accessible for readers who are not familiar with natural sciences. Building on these explanations, we develop a simplifying atmospheric model that demonstrates a widely unknown aspect of global warming: the greenhouse effect enhances its own causes and, as a repercussion, induces a further global warming. This effect, referred to as domino effect, is based on the additional production of heat in the atmosphere, happening substantively while heat passes our atmosphere on its way to outer space. On the basis of our considerations, in principle, technological efficiency improvements appear to be an attractive measure for mitigating global warming.

We disagree with Kenneth Gillingham and colleagues' contention that the rebound effect--in which greater consumption offsets the energy saved by increasing efficiency --is exaggerated (Nature 493, 475-476; 2013). We and [...]