Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/331349 
Year of Publication: 
2025
Series/Report no.: 
IES Working Paper No. 11/2025
Publisher: 
Charles University in Prague, Institute of Economic Studies (IES), Prague
Abstract: 
We analyze the determinants of industrial energy demand in five new European Union member states (Czechia, Lithuania, Poland, Romania, and Slovenia) with a focus on the effects of energy prices, sectoral output, energy-saving investment, and technological progress. Using a panel dataset covering 16 industrial sectors over more than two decades (1995-2018), we employ advanced estimation approaches employed in related literature to address issues of heterogeneity, cross-sectional dependence, and persistence, often overlooked in studies relying solely on fixed effects. Our empirical results show that output levels and energy prices consistently drive energy consumption, with their effects amplified when cross-correlations are accounted for. From our preferred estimation procedure (Dynamic Common Correlated Effects - Mean Group), we obtain evidence of intuitively relevant values: the energy price elasticity is -0.42, and the output elasticity is 0.32. Energy demand exhibits moderate levels of persistence, showing that past consumption patterns drive current energy consumption. Energy-saving investments tend to increase energy use, as they often accompany industrial growth or modernization, whereas research and development show only a limited effect. These findings provide valuable insights to policymakers on energy solutions to influence energy demand and mitigate the pressures of industrial growth.
Subjects: 
Energy demand
cross-sectoral dependency
income elasticity
price elasticity
JEL: 
C23
O52
Q41
Q43
Q48
Document Type: 
Working Paper

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