International and sectoral variation in energy prices 1995-2011: how does it relate to emissions policy stringency?
The lack of information on the cost of energy for industry poses a major barrier in assessing the effects of energy prices and taxes on the economic performance and international competitiveness of regulated firms. This paper documents the construction of an energy price index for 12 industrial sectors, covering 48 countries for the period 1995 to 2011. Two distinct indices are constructed: the Variable-Weight Energy Price Level (VEPL) which is useful for cross sectional analysis or descriptive statistics and; the Fixed-Weight Energy Price Index (FEPI) which is designed for use in times series and panel data analysis. We present a descriptive analysis of the major trends in energy prices and taxes, and provide guidelines for the use of our energy price data which is made publicly available for download. The indices reveal, among other things, that industrial energy prices have been on an increasing trend in real terms since 2000 for most countries, and that the gap between the highest and the lowest energy prices internationally has widened with the average price in the 10% highest countries being 2.4 times larger than the 10% lowest in 2010. The bulk of variation in industrial energy prices across countries is attributable not to the wholesale price differences but the tax component. We then evaluate to what extent energy prices are a good proxy for emissions policy stringency, and it shows that it has many attractive qualities and avoid problems common to other proxies which have been used in the literature.
This project constructs a dataset of industrial energy prices indices for 48 countries for the period 1995 to 2011. This is done both at the country level and at the sector level, covering 12 industry sectors. This dataset is made available for download publicly on this website. Original data are provided by the International Energy Agency, as well as other sources. The procedures used to construct the dataset including the methodology developed to reduce missing data-points, are documented in the accompanying working paper, as are the full set of original data sources. Two industrial energy price measures have been developed: the Variable Weights Energy Price Level (VEPL) and the Fixed Weights Energy Price Index (FEPI). The VEPL is useful for cross-sectional analysis and descriptive statistics, whereas the FEPI is useful for time-series and panel analysis.
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