Econometric analysis of the wood pellet market in Austria

The growing demand in wood pellets has driven up market prices and has accelerated market dynamics in recent years. This article presents an econometric analysis of factors influencing demand and supply of wood pellets in the residential heating sector in Austria. Time series data on prices, quantities, imports and exports between 2000 and 2014 are used in a two-stage least squares (2SLS) regression. Pellets demand is found to be inelastic (-0.67) and pellets supply unit-elastic (1.16). Thus, consumers are highly exposed to price changes resulting from supply shocks.