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An Almost Ideal Demand System Model of Household Vehicle Fuel Expenditure Allocation in the United States

Gbadebo Oladosu

Year: 2003
Volume: Volume 24
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol24-No1-1
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Abstract:
In this study I model vehicle-fuel expenditure allocation in multi-vehicle households based on the Almost Ideal Demand System (AIDS).Using data from surveys conducted by the Energy Information Administration in 1988, 1991 and 1994, I estimate the AIDS model, augmented with a comprehensive set of household and vehicle characteristics for households owning 1 to 4 vehicles ordered by vehicle age. Results show that vehicle characteristics are the most significant factors in the expenditure allocation process. Mean and standard deviation of price, expenditure and Allen substitution elasticities are calculated across households. Own-price elasticities for all vehicles are close to 1. Allen substitution elasticities indicate that all vehicle pairs are substitutes, and only vehicle 1 is found to be expenditure inelastic. The approach taken in this study enables a disentangling of vehicle allocation/substitution effects from aggregate household vehicle use behavior. This will be useful in the analysis of efficiency and distributional effects of policies affecting household transportation.



A System Of Hourly Demand in the Italian Electricity Market

Simona Bigerna and Carlo Andrea Bollino

Year: 2015
Volume: Volume 36
Number: Number 4
DOI: 10.5547/01956574.36.4.sbig
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Abstract:
The purpose of this paper is to analyze and test demand behavior in the organized electricity market. According to a theoretical framework of heterogeneous agents' behavior, we estimate a complete multi-stage system weakly separable using individual demand bid data in the Italian Power Exchange. The novel contribution of this paper is twofold. Firstly, we model hourly demand of heterogeneous groups of agents acting in the Italian electricity market with a simultaneous system for all 24 hours. Secondly, we empirically measure the entire structure of expenditure elasticities and cross price elasticities for all 24 hours of the day, ascertaining whether hourly electricity demands can be considered normal or luxury goods and substitutes or complements in an organized electricity market. Econometric estimation shows that price elasticity tends to be higher when hourly price peak. Moreover, electricity exhibits both substitutability and complementarity characteristic in different hours of the day, the former during the day and the latter during the night. Electricity appears to be a normal good during nighttime and a luxury good during daytime. The demand structure has welfare improving policy implications, because appropriate regulation can favor consumer behavior adjustment to shave consumption away from peak prices, thus yielding lower aggregate equilibrium expenditures. To this end, we advocate reforming the actual administered two-price tariff structure to introduce real time pricing options for Italian final users.



Analyzing the Effects of Renewable Energy and Climate Conditions on Consumer Welfare

Tarek Atalla, Simona Bigerna, Carlo Andrea Bollino, and Rolando Fuentes

Year: 2017
Volume: Volume 38
Number: KAPSARC Special Issue
DOI: 10.5547/01956574.38.SI1.tata
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Abstract:
This paper aims to measure the impact of the gradual adoption of Renewable Energy Sources (RES) on the welfare of consumers. To this end, we construct a theoretically founded measure of the true cost of living (TCL) and the equivalence scale (ES) for the household sector, based on a weather database of heating and cooling degree days. We estimate those values for 64 countries, which represent over two-thirds of the world population, according to World Bank statistics. We assume that the identified household in each country minimizes its expenditure on energy and other goods. We simulate alternate scenarios of renewables implementation in 2035, taking account of different RES prices, and assess the related societal implications of a gradual transition from fossil fuels to RES. The empirical results offer policymakers a basis for designing appropriate scenarios for the deployment of renewables, with the aim of fostering consumer welfare even in the context of international negotiations.



The Vertical and Horizontal Distributive Effects of Energy Taxes: A Case Study of a French Policy

Thomas Douenne

Year: 2020
Volume: Volume 41
Number: Number 3
DOI: 10.5547/01956574.41.3.tdou
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Abstract:
This paper proposes a micro-simulation assessment of the distributional impacts of the French carbon tax. It shows that the policy is regressive, but could be made progressive by redistributing the revenue through flat-recycling. However, it would still generate large horizontal distributive effects and harm a significant share of low-income households. The determinants of the tax incidence are characterized precisely, and alternative targeted transfers are simulated on this basis. The paper shows that given the importance of unobserved heterogeneity in the determinants of energy consumption, horizontal distributive effects are much more difficult to tackle than vertical ones.



Rebound Effects for Household Energy Services in the UK

Mona Chitnis, Roger Fouquet, and Steve Sorrell

Year: 2020
Volume: Volume 41
Number: Number 4
DOI: 10.5547/01956574.41.4.mchi
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Abstract:
This study estimates the combined direct and indirect rebound effects from energy efficiency improvements in the delivery of six energy services to UK households, namely: heating; lighting; cooking; refrigeration and clothes washing; entertainment and computing; and private vehicle travel. We use a unique database on the price and quantity demanded of these energy services over the past half century. We estimate a two-stage almost ideal demand system for household expenditure, using these energy services as expenditure categories. We estimate rebound effects in terms of carbon emissions and only include the �direct� emissions associated with energy consumption. Our results suggest direct rebound effects of 70% for heating, 54% for private vehicle travel and ~90% for the other energy services. However, these effects are offset by negative indirect rebound effects�that is, indirect rebounds contribute additional emission savings. As a result, our estimates of combined rebound effects are generally smaller, namely 54% for lighting, 55% for heating, 41% for refrigeration and clothes washing, �12% for entertainment and computing, 44% for cooking and 69% for vehicle travel. We also find some evidence that rebound effects have declined over time. We provide some important caveats to these results, and indicate priorities for future research.



Understanding Hourly Electricity Demand: Implications for Load, Welfare and Emissions

Amin Karimu, Chandra Kiran B.Krishnamurthy, and Mattias Vesterberg

Year: 2022
Volume: Volume 43
Number: Number 1
DOI: 10.5547/01956574.43.1.akar
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Abstract:
In this study, using hourly data from a representative sample of Swedish households on standard tariffs, we investigate the welfare and emission implications of moving to a mandatory dynamic pricing scheme. We allow demand during different hours of a day to affect utility differently, and account for the derived nature of electricity demand by explicitly accounting for the services (end-use demands) that drive hourly electricity demand. We use the flexible Exact Affine Stone Index (EASI) demand system, which accommodates both observed and unobserved heterogeneity in preferences, to understand changes in load consequent to hourly retail pricing. Our findings suggest that, following hourly retail pricing, changes in load patterns across hours are relatively small: total load changes by less than one percent. There are correspondingly small reductions in welfare and carbon emissions, of less than 0.2 percent and 0.47 percent, respectively. Overall, in the context of a decentralized, competitive retail electricity market-setting, our results suggest that the benefits to ensuring that the retail price of electricity reflects the hourly marginal cost is small, at least in the short run.



Does Income Affect Climbing the Energy Ladder? A New Utility-Based Approach for Measuring Energy Poverty

Luan Thanh Nguyen, Shyama Ratnasiri, and Liam Wagner

Year: 2023
Volume: Volume 44
Number: Number 4
DOI: 10.5547/01956574.44.4.lngu
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Abstract:
Energy poverty measures are gradually becoming less relevant for fast-developing countries, where the energy mix consists of traditional and modern energies. We propose a new approach for measuring energy poverty by modifying the Exact Affine Stone Index (EASI) demand system to include implied disutility of energy use. The disutility arises from the effects of price or income changes and the use of polluting energies. Using data from Vietnam, we found that energy poverty could happen at higher income levels than the level considered in the literature, and higher incomes may not encourage households to climb the energy ladder. However, consuming carbon-intensive fuel does not necessarily mean energy poor.





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