Firms' energy demand and the role of energy taxes: Elasticities estimation of industrial firms in Italy

In this paper we investigate interfuel substitution in the Italian industrial sector using a micro-dataset and a micro-simulation model for firms. According to our estimates there are significant differences between small and large firms. Energy demand of main energy products is not very responsive to relative price changes in the case of firms under 250 workers, whereas higher (negative) own elasticities have been estimated for larger firms, suggesting that price signals are most effective in the latter case. Most of the cross-price elasticities have positive signs, confirming that there is room for a change in energy product mix, which may also be stimulated by a careful excise tax rate design.