Estimation of residential electricity demand in Hong Kong under electricity charge subsidies

DURMAZ T., Pommeret A., TAŞTAN H.

ENERGY ECONOMICS, vol.88, 2020 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 88
  • Publication Date: 2020
  • Doi Number: 10.1016/j.eneco.2020.104742
  • Journal Name: ENERGY ECONOMICS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, PASCAL, ABI/INFORM, Agricultural & Environmental Science Database, Business Source Elite, Business Source Premier, Compendex, EconLit, Environment Index, Geobase, INSPEC, PAIS International, Public Affairs Index, Sociological abstracts
  • Keywords: Residential electricity, Price and income elasticities, Cointegration analysis, Electricity charge subsidies, ENERGY DEMAND, UNIT-ROOT, CONSUMPTION, ELASTICITIES, TEMPERATURE, REGRESSION, DYNAMICS, CLIMATE, IMPACT, SPAIN
  • Yıldız Technical University Affiliated: Yes


Over the past decade, the Hong Kong (HK) government provided electricity charges subsidies for residential accounts to alleviate the burden of inflation and, later, the burden of economic downturn. In this study, we estimate an econometric model of residential electricity demand and test the existence of a stable long-run relationship for the period 1980-2016, while accounting for the relief measures set out by the HK government since 2008. Empirical results suggest that there exists a long-run relationship among residential electricity consumption, electricity price, income per capita, and weather variables (temperature or cooling degree days). In the absence of electricity charge subsidies, the demand is found to be both price and income inelastic. On the other hand, HK's residential electricity consumers are unresponsive to price and income changes when electricity subsidies are in place. Following its new carbon reduction plan, HK is gradually phasing out coal for electricity generation to replace it mainly with natural gas. Our results suggest that new residential electricity charge subsidies can lessen the effectiveness of6 climate policies aimed at reducing electricity consumption through increases in the electricity price. (C) 2020 Elsevier B.V. All rights reserved.