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The wood pellet market in Austria: A structural market model analysis

Author

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  • Kristöfel, Christa
  • Strasser, Christoph
  • Schmid, Erwin
  • Morawetz, Ulrich B.

Abstract

EU bioenergy policies and oil price hikes have resulted in a significant increase of installed pellet boilers for residential heating. Hence, European demand for wood pellets has been growing faster and more steadily than supply leading to rising market prices in recent years. This article presents an econometric analysis of demand and supply of wood pellets in the residential heating sector in Austria, one of the most dynamic markets for residential pellets. Annual and monthly time series data between 2000 and 2014 are used in a two-stage least-squares (2SLS) regression to estimate supply and demand elasticities of wood pellets. In all model specifications, pellets demand is found to be inelastic (from −0.66 to −0.76) and pellets supply unit-elastic (from 1.03 to 1.18). Thus, consumers are highly exposed to price changes resulting from supply shocks. Policies which support investments in pellet boilers will shift the demand of wood pellets and likely leading to higher prices for consumers.

Suggested Citation

  • Kristöfel, Christa & Strasser, Christoph & Schmid, Erwin & Morawetz, Ulrich B., 2016. "The wood pellet market in Austria: A structural market model analysis," Energy Policy, Elsevier, vol. 88(C), pages 402-412.
    • Handle: RePEc:eee:enepol:v:88:y:2016:i:c:p:402-412
    DOI: 10.1016/j.enpol.2015.10.039
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    Cited by:

    1. Borzykowski, Nicolas, 2019. "A supply-demand modeling of the Swiss roundwood market: Actors responsiveness and CO2 implications," Forest Policy and Economics, Elsevier, vol. 102(C), pages 100-113.
    2. Guo, Jinggang & Gong, Peichen, 2019. "Assessing the impacts of rising fuelwood demand on Swedish forest sector: An intertemporal optimization approach," Forest Policy and Economics, Elsevier, vol. 105(C), pages 91-98.
    3. Karner, K. & Dißauer, C. & Enigl, M. & Strasser, C. & Schmid, E., 2017. "Environmental trade-offs between residential oil-fired and wood pellet heating systems: Forecast scenarios for Austria until 2030," Renewable and Sustainable Energy Reviews, Elsevier, vol. 80(C), pages 868-879.
    4. Borzykowski, Nicolas, 2017. "The Swiss market for construction wood : estimating elasticities with time series simultaneous equations," 91st Annual Conference, April 24-26, 2017, Royal Dublin Society, Dublin, Ireland 258659, Agricultural Economics Society.
    5. Proskurina, Svetlana & Alakangas, Eija & Heinimö, Jussi & Mikkilä, Mirja & Vakkilainen, Esa, 2017. "A survey analysis of the wood pellet industry in Finland: Future perspectives," Energy, Elsevier, vol. 118(C), pages 692-704.

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    More about this item

    Keywords

    Q21; Wood pellet market; Elasticities; Econometric partial equilibrium model;
    All these keywords.

    JEL classification:

    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices

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