Abstract
This paper provides empirical evidence and theoretical grounds to support the existence of energy cost constants, i.e., relatively stable energy costs to income ratios, not only country-wide, but also in major energy end-use sectors. These ratios are similar across different countries at different stages of economic development, but they also depend on the country-specific economy structure and legacy of previous long-standing energy pricing, taxes, and subsidies policies, which it takes time to shift from. The aggregated country-wide energy costs constant (range) is a linear combination of those for sectors weighted by the contributions of respective sectors’ income indicators to either gross output or GDP. Deviation of energy costs shares from the constrained range is possible but limited. The “rule of gravitation” goes: for the whole cycle real energy prices in each sector may grow only as much as energy intensity declines, and inversely promoting energy efficiency can be viewed as a policy, of which the environmental cobenefits will be undermined by rebound effects, unless it is accompanied by rising energy prices.
Highlights
The divergence in energy prices across different countries is often associated with a comparative advantage on the presumption that higher energy prices equate to countries bearing a higher cost burden of energy provision
The “rule of gravitation” goes: for the whole cycle real energy prices in each sector may grow only as much as energy intensity declines, and inversely promoting energy efficiency can be viewed as a policy, of which the environmental cobenefits will be undermined by rebound effects, unless it is accompanied by rising energy prices
Sectorial energy cost share” (ECS) constants offer a new angle to energy taxation and environmental pricing as they suggest making a focus on ECSs, not on prices
Summary
The divergence in energy prices across different countries is often associated with a comparative advantage on the presumption that higher energy prices equate to countries bearing a higher cost burden of energy provision. For the purpose of verifying the results obtained from national sources, as well as from KLEMS and WIOD databases, and so as to expand the field of analysis, another dataset of energy expenditures covering OECD countries since the early 1970s was developed [11] From all those sources we explore the hypothesis of long-term constancy in energy expenditures relative to income in individual sectors advanced by Bashmakov [1]. It presents how aggregated countrywide energy costs constants are composed based on a combination of those for sectors. The last section provides policy implications, as well as potential applications of the energy costs constants
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