Energy Price Hikes Research Articles

Energy price surges and inflation: Fiscal policy to the rescue?

Motivated by the fiscal policy measures taken by euro zone governments during the 2021/2022 energy crisis, we examine their ability to counter inflationary surges resulting from energy price hikes in energy-importing economies. We use a calibrated small-open economy model in which monetary policy fixes the exchange rate. Subsidies on the sale of energy and on firms' energy expenditures are among the most effective instruments. They reduce marginal costs and limit the pass-through of the price hike which attenuates inflation and stabilizes output and the current account. While inflation indexation of prices aggravates the adverse effects, it renders consumption tax cuts more effective as they attenuate the shock's domestic circulation.

Fumio Kishida’s first year in PM office: Is Abenomics to end or stay?

The article addresses the experience of Fumio Kishida’s first year as Prime Minister of the Japanese government with respect to its economic policy vision and implementation. The latter is presented by comparing it to the policy pursued over the past ten years by PM Kishida’s predecessors in the office, on the one hand, and to the commitments he announced during the 2021 election campaign, on the other. The paper notes that, in its basic moments, the economic policy of the cabinet of the new leader of the ruling Liberal Democratic Party continues the course previously maintained by the team of then-PM Shinzō Abe, known as Abenomics. This manifests itself in the specifics of the use of basic tools of macroeconomic policy, monetary and tax instruments to be named first, as well as in choosing priorities for the policy stimulating consumption and economic activity. The continuity of the course can be particularly illustrated by loose monetary policy; positive view of the depreciation of Japanese national currency; moderately expansionary fiscal policy relying on domestic borrowing; preference given to the interests of the corporate sector. Legacy inherited from previous administrations also includes the government striving to revitalize private demand; promoting investment in R&D, venture and innovating enterprises with particular stress on regional economies. Kishida’s particular emphasis on invigorating redistributive mechanisms and increasing labor share in national income has not yet led to material decisions and actions by the government. Nor did Kishida make progress with his commitment to expand the ring of beneficiaries of the capitalist market system, as part of his idea of “new capitalism”.In recent months, the attention of the government and its economic team has been largely focused on overcoming the consequences of the disruption of transnational chain lines in production, trade, and logistics, as a result of the coronavirus pandemic and rising geopolitical tensions. In addressing this issue, they prioritized subsidizing businesses and households to partially offset energy and food price hikes; securing diversification or localization of critical links of trade and production chains, as well as the exclusion of politically undesirable or unstable locations from them. At this stage, however, the actions of the government are limited to setting relevant goals and plans to provide finance for programs with effectiveness yet to be proved.

How do energy price hikes affect exchange rates during the war in Ukraine?

How do energy price hikes affect exchange rates during the war in Ukraine?

Pandemic, War, and Global Energy Transitions

The COVID-19 pandemic and Russia’s war on Ukraine have impacted the global economy, including the energy sector. The pandemic caused drastic fluctuations in energy demand, oil price shocks, disruptions in energy supply chains, and hampered energy investments, while the war left the world with energy price hikes and energy security challenges. The long-term impacts of these crises on low-carbon energy transitions and mitigation of climate change are still uncertain but are slowly emerging. This paper analyzes the impacts throughout the energy system, including upstream fuel supply, renewable energy investments, demand for energy services, and implications for energy equity, by reviewing recent studies and consulting experts in the field. We find that both crises initially appeared as opportunities for low-carbon energy transitions: the pandemic by showing the extent of lifestyle and behavioral change in a short period and the role of science-based policy advice, and the war by highlighting the need for greater energy diversification and reliance on local, renewable energy sources. However, the early evidence suggests that policymaking worldwide is focused on short-term, seemingly quicker solutions, such as supporting the incumbent energy industry in the post-pandemic era to save the economy and looking for new fossil fuel supply routes for enhancing energy security following the war. As such, the fossil fuel industry may emerge even stronger after these energy crises creating new lock-ins. This implies that the public sentiment against dependency on fossil fuels may end as a lost opportunity to translate into actions toward climate-friendly energy transitions, without ambitious plans for phasing out such fuels altogether. We propose policy recommendations to overcome these challenges toward achieving resilient and sustainable energy systems, mostly driven by energy services.

Back from the Brink

When Tata Chemicals Europe’s soda ash operation faced potentially business-threatening energy price hikes, it required a Herculean effort from the team to drag it out of the mire

A review of water heating technologies: An application to the South African context

Abstract The process of water heating consumes enormous amounts of energy. South African households may see up to 40% of their total energy be allotted to the heating of water. The implementation of energy efficient or renewable energy source technologies, for the main purpose of heating water, may assist in reducing the magnitude of the energy crisis that South Africans are facing daily. This will, in turn, reduce energy consumption and costs, so that the energy price hikes do not affect the consumers as severely as it would otherwise. The purpose of this paper is to provide a survey of the most frequently used domestic water heating technologies. The paper aims to critically analyse and summarize recent advancements made in renewable and non-renewable water heating technologies, particularly in the South African case. These technologies include the electric storage tank water heater, solar water heaters (passive and active circulation), heat pump water heater, geothermal water heating, photovoltaic-thermal water heater, gas-fired tankless water heater, biomass water heater and oil-fired water heater. Substantial research works and other academic studies focusing on efficiency improvement, optimal design and control, were consulted and categorized in terms of contributions, focus and respective technologies. The key findings of the review conducted on the various water heating technologies are discussed and organized, based on the advantages, drawbacks, approximate initial investment, average life expectancy and payback period. The results of this survey identify gaps in existing research. The aim is to propose a new perspective on the importance of energy efficient hybrid water heating systems and the cost savings they might offer.

Targeted policies can compensate most of the increased sustainability risks in 1.5 °C mitigation scenarios

Meeting the 1.5 °C goal will require a rapid scale-up of zero-carbon energy supply, fuel switching to electricity, efficiency and demand-reduction in all sectors, and the replenishment of natural carbon sinks. These transformations will have immediate impacts on various of the sustainable development goals. As goals such as affordable and clean energy and zero hunger are more immediate to great parts of global population, these impacts are central for societal acceptability of climate policies. Yet, little is known about how the achievement of other social and environmental sustainability objectives can be directly managed through emission reduction policies. In addition, the integrated assessment literature has so far emphasized a single, global (cost-minimizing) carbon price as the optimal mechanism to achieve emissions reductions. In this paper we introduce a broader suite of policies—including direct sector-level regulation, early mitigation action, and lifestyle changes—into the integrated energy-economy-land-use modeling system REMIND-MAgPIE. We examine their impact on non-climate sustainability issues when mean warming is to be kept well below 2 °C or 1.5 °C. We find that a combination of these policies can alleviate air pollution, water extraction, uranium extraction, food and energy price hikes, and dependence on negative emissions technologies, thus resulting in substantially reduced sustainability risks associated with mitigating climate change. Importantly, we find that these targeted policies can more than compensate for most sustainability risks of increasing climate ambition from 2 °C to 1.5 °C.

How Can We Gauge Energy Poverty? A Multidimensional Approach

This paper presents a new approach to measuring energy or fuel poverty for developed countries. As such, it develops a multidimensional energy poverty index (MEPI), which can evaluate energy poverty from a multidimensional angle. The MEPI is composed of three attributes (dimensions) of energy poverty in developed countries: energy costs, income, and energy efficiency of housing. We apply this measure to gauge energy poverty in Japan after the 2000s, focusing on the year of the Great East Japan Earthquake and the Fukushima nuclear accident. Based on unique microdata, the results show that energy poverty has been aggravated in Japan since the 2000s. Analyzing the situation by household type, we can categorize mother-child and single-aged households, in particular, as vulnerable to energy poverty. In addition, the results indicate the severe impact of energy price hikes after the Fukushima accident on energy poverty aggravation, especially for vulnerable households.

A new framework for EU energy security: putting sustainability first

ABSTRACTThe EU energy strategy is hard-poised to ensure energy security for the Union, mainly due to its fixation on fossil energy imports. This paper argues that energy security can holistically be addressed only in case sustainability becomes a priority goal. Such a re-conceptualisation does not only pave the way for a radical restructuring of the energy systems in Europe that can cater for the EU’s energy needs in a sustainable way, but also theorises energy as a scarce resource that hence should be highly priced. On the basis of a thorough ecological tax reform, energy prices can convey accurate signals to households and enterprises and allow for a smooth function of the economy that is today frequently upset by energy price hikes and slumps. The paper aims to make a timely contribution to the current debate on the shape and priorities of the Energy Union by making a strong case for a re-ordering of priorities in EU energy strategy.

Real-Time Recognition Non-Intrusive Electrical Appliance Monitoring Algorithm for a Residential Building Energy Management System

The concern of energy price hikes and the impact of climate change because of energy generation and usage forms the basis for residential building energy conservation. Existing energy meters do not provide much information about the energy usage of the individual appliance apart from its power rating. The detection of the appliance energy usage will not only help in energy conservation, but also facilitate the demand response (DR) market participation as well as being one way of building energy conservation. However, energy usage by individual appliance is quite difficult to estimate. This paper proposes a novel approach: an unsupervised disaggregation method, which is a variant of the hidden Markov model (HMM), to detect an appliance and its operation state based on practicable measurable parameters from the household energy meter. Performing experiments in a practical environment validates our proposed method. Our results show that our model can provide appliance detection and power usage information in a non-intrusive manner, which is ideal for enabling power conservation efforts and participation in the demand response market.

Energy Prices and Business Cycles

Despite energy price hikes in recent years, growth rates turned out to be high in most industrialised countries. This pattern starkly contrasts the adverse effects that energy price shocks exerted on growth in the 1970s and 1980s. This study investigates whether a reduction in the energy cost share or different sources of energy price hikes are responsible for this divergence. By adding an exogenous twovariable VAR to a new open economy model for Germany, both energy prices and global economic activity are specified to be independent from domestic variables but assumed to influence each other. We show that it is sensible to calibrate the model in accordance with long-run fluctuations in important, observable, structural parameters and VAR coefficients on a period by period basis. Increases in energy prices and in global output serve as supply side and demand side shocks respectively. Our results suggest that the effects of recent energy price hikes have been different from past experiences because they were demand driven. Therefore, supply driven energy price increases could still be an important source of business cycle fluctuations. JEL Classifications: E31, E32, F41 Keywords: Oil prices, new Keynesian open economy model

Supply-side effects of strong energy price hikes in German industry and transportation

This article studies the short-term effects of energy price hikes on the supply of industrial goods and transport services including the repercussions on remuneration of input factors. The empirical analysis is based on a theoretical model, which assumes that the output good is produced by capital, labour and energy according to a nested production function framework where capital and energy are combined by a CES function at the intermediate stage. The output responses to energy price changes are derived, using estimates of the elasticity of substitution. While industry suffered more from the oil price shock of the late 1970s than from that of the early 1970s and the 2004–2008 upsurge, evidence suggests the reverse for transportation. Regarding the impact on income distribution, both sectors share the same pattern, whereby in the recent episode, rising energy costs were more than compensated by falling unit labour costs, while in the 1970s, cost structures had been strained by an expansive wage policy in addition to the oil price shocks.

The linkage between energy consumption and income in six emerging economies of Asia

PurposeThe purpose of this paper is to examine the short‐ and long‐run causal relationship between energy consumption and gross domestic product (GDP) of six emerging economies of Asia. The importance of identifying the direction of causality emanates from its relevance in national policy‐making issues regarding energy conservation.Design/methodology/approachThis paper employs co‐integration and vector error correction modeling along with generalized impulse response functions and varience decomposition tests to check the robustness of the findings.FindingsThe empirical results show that there exists unidirectional short‐ and long‐run causality running from energy consumption to GDP for China, uni‐directional short‐run causality from output to energy consumption for India, whilst bi‐directional short‐run causality for Thailand. Neutrality between energy consumption and income is found for Indonesia, Malaysia, and Philippines. Both the generalized variance decompositions and impulse response functions confirm the direction of causality.Research limitations/implicationsThese findings have important policy implications for the countries concerned. The results suggest that while India may directly initiate energy conservation measures, China and Thailand may opt for a balanced combination of alternative polices.Originality/valueMany economists and social scientists are claiming that the increased demand for energy from developing countries like China and India is one of the major reasons for the energy price hikes in recent times. In this backdrop, it is justified to search causal relationship between energy consumption and national output (GDP) of some developing countries from Asia. Since the traditional bivariate approach suffers from omitted variable problems, this paper employs a trivariate demand side approach consisting of energy consumption, income and prices.

Energy taxation and the double dividend effect in Taiwan's energy conservation policy—an empirical study using a computable general equilibrium model

Faced with pressure from greenhouse gas reductions and energy price hikes, the Taiwan government is in the process of developing an energy tax regime to reflect environmental external costs and effectively curb energy consumption, as well as mitigate CO 2 emissions through an adequate pricing system. This study utilizes a CGE model to simulate and analyze the economic impacts of the draft Energy Tax Bill and its complementary fiscal measures. Under the assumption of tax revenue neutrality, the use of energy tax revenue generated for the purpose of reducing income tax is the best choice with double dividend effects since it will effectively stimulate domestic consumption and investment, and, consequently, mitigate the negative impacts of the distortionary tax regime. The double dividend effect is less significant, however, when the supplementary measures being used are for government expenditure. Nevertheless, all supplementary measures have effectively reduced energy consumption, which means they have delivered at least the first dividend—in the sense of CO 2 emissions control. It has been verified in this study that having adequate public-finance policy measures is the key to realizing the double dividend effect.

Supply-Side Effects of Strong Energy Price Hikes in German Industry and Transportation

The paper studies the short-term effects of energy price hikes on the supply of industrial goods and transport services including the repercussions on remuneration of input factors. While industry had suffered more strongly from the oil price shock of the late 1970s compared with the one of the early 1970s and the 2004-08 upsurge, evidence is reverse for transportation. Regarding the impact on the income distribution, both sectors share the pattern that in the recent episode rising energy costs were more than compensated by falling unit labor costs while in the 1970s cost structures had been strained by expansive wage policy in addition to the oil price shocks.

Impacts of Food and Energy Price Hikes and Proposed Coping Strategies

AbstractBased on sample survey data for the years 2006 and 2007, we find that inflation of food and energy prices in China is moving at a slower pace than in the international market; however, the livelihood of low income groups has been significantly impacted. Urban sample households in low income groups have been shifting from consumption of high value food to lower value substitutes; and all of the rural sample households are reducing their total consumption expenditure in real terms. The Engel's coefficient of the rural household enlarged while their proportion of spending on clothing and energy declined. Farmers' households are moving toward more imbalanced diets, and the nutritional status of the poor is apparently deteriorating. The emergency‐response measures that the government should implement include stopping subsidies to biofuel producers, who use foodstuffs as inputs, and providing food aid to the poor. The mid‐term strategies should include anti‐monopoly tactics, improving the market environment for the right competition, and eliminating price distortion. Midterm and long‐term socioeconomic policy reform must be undertaken to adjust the social structure, to correct the mechanism of factor price formation, and to transform the pattern of economic growth.

What determines the output drop after an energy price increase: Household or firm energy share?

We investigate a DSGE economy's response to energy price hikes for changing firm and household energy shares over the 1970–2005 period. Simulation results indicate that the economy's output response is mainly determined by the firm rather than the household share.

The energy demand in the manufacturing sector of Pakistan: some further results

The purpose of this study was to re-examine the role of energy in the manufacturing sector of Pakistan using a Partial Equilibrium Approach. GL restricted cost function along with the factor demand equations were estimated using Zellner’s iterative procedure. Higher energy prices do not seem to adversely affect investment in capital. Substitution possibilities between energy and non-energy inputs are very limited and therefore energy price hikes may directly affect the cost of production. Inter-fuel cross price elasticities indicate that there are substitution possibilities between electricity and gas.

Energiewirtschaftliche Rationalisierung bei der Projektierung von Chemieanlagen

AbstractReduction of energy costs in planning of chemical plant. Energy consumption in the chemical industry is especially high, and on inclusion of energy sources used as raw materials the energy consumption figures are even doubled. The most important energy consumption data are presented. The economic incentives for the reduction of energy costs have increased with energy price hikes, and project engineering of new chemical plants offers an extensive field for energy saving measures. An account of the basic methods of economic optimisation of chemical plant equipment, with particular regard to the reduction of energy consumption, is followed by a systematic review of the various sectors of chemical plant design in which energy saving measures can be applied.