Hybrid seminar: The price elasticity of residential gas demand and the implications for climate policy

This study leverages the substantial and unforeseen increase in energy prices resulting from the Russian invasion in Ukraine, in February 2022, to estimate the efficacy and distributional consequences of an energy tax on the residential consumption of gas in the Netherlands. It uses quasi-random variation in the remaining duration of fixed-price contracts to estimate the differences in the amounts of gas consumed by those households whose fixed-price contracts expired between September 2022 and April 2023 (the period of with the largest increases in prices) to that of those households whose contract expiration dates extended beyond September 2023. Whereas the latter households continued to pay their pre-escalation gas prices, the former were confronted with price jumps of between 70 and 320%. The study estimates the overall impact on residential gas consumption, and also explores whether the price elasticity of demand is income-dependent. Combined, this approach enables shedding light on the potential impact and distributional consequences of energy taxation.