99 MARTINDALE CENTER FOR THE STUDY OF PRIVATE ENTERPRISE Appendix 1 Welfare analysis methodology Several unique challenges confront the analysis of the Krk terminal’s impact on electricity prices. Multiple factors also influenced those costs during the same period, including the gradual and uncertain increase in gas into the Croatian market, the Russian–EU energy crisis, COVID-era price distortions, and regional spillovers from gas exports to Hungary and other nations in the region. Because Croatia exports gas from Krk to several neighboring nations, those countries may have been indirectly affected by the terminal, complicating standard comparison approaches. An approach for statistically constructing a credible counterfactual is the synthetic control method (Abadie et al., 2010), which builds a weighted composite control group to match pretreatment trends. A panel data set was developed using Eurostat data for 2008–2024 from Croatia, Bulgaria, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia. Synthetic control method (modelling in Stata) resulted in a weighted combination of five countries, Estonia, Latvia, Lithuania, Slovakia, and Slovenia, whose preterminal price trends most closely matched Croatia’s. The estimation (Appendix Table 1) was a two-way fixed effects regression model: where i indexes country and t year; ln(ElectricityPriceit), log electricity price; β1, the difference-in-differences coefficient on Treatedi × Postt; X′ it β, the time-varying country-level controls; αi, γt, and δit. the country fixed effects, year fixed effects, and country-specific linear trends, respectively; and εit. the country-clustered error. Model 1 2 3 4 Treated × Post –0.147* –0.148** –0.215** –0.267** (0.058) (0.046) (0.083) (0.073) Log final gas consumption 0.617** 0.615* 0.411 0.416 (0.237) (0.263) (0.355) (0.325) Log gas price –0.005 0.130 0.068 (0.102) (0.119) (0.141) Log final electricity generation 1.154* 0.789* (0.566) (0.344) Log gas electricity generation 0.039 0.048 (0.031) (0.044) Log renewable electricity generation 0.184 0.188* (0.106) (0.092) Log solid fossil fuel generation –0.009 –0.001 (0.009) (0.013) Log population –2.191 (2.902) Log GDP per capita 1.065 (0.549) Constant –8.060*** –8.063*** –18.332*** –8.431 (2.104) (2.077) (2.729) (23.853) Observations 72 72 72 72 R-squared 0.955 0.955 0.964 0.967 Within R-squared 0.094 0.095 0.284 0.334 Country fixed effects Yes Yes Yes Yes Year fixed effects Yes Yes Yes Yes Country trends Yes Yes Yes Yes Clusters (country) 6 6 6 6 Appendix Table 1 Effect of treatment on log electricity prices *p < 0.10; **p < 0.05; ***p < 0.01. Notes: Dependent variable is log electricity price. All regressions estimated using reghdfe with country, year, and country-specific linear trends absorbed. Standard errors clustered at the country level are shown in parentheses. Model 1 2 3 4 Treated × Post –0.147* –0.148** –0.215** –0.267** (0.058) (0.046) (0.083) (0.073) Log final gas consumption 0.617** 0.615* 0.411 0.416 (0.237) (0.263) (0.355) (0.325) Log gas price –0.005 0.130 0.068 (0.102) (0.119) (0.141) Log final electricity generation 1.154* 0.789* (0.566) (0.344) Log gas electricity generation 0.039 0.048 (0.031) (0.044) Log renewable electricity generation 0.184 0.188* (0.106) (0.092) Log solid fossil fuel generation –0.009 –0.001 (0.009) (0.013) Log population –2.191 (2.902) Log GDP per capita 1.065 (0.549) Constant –8.060*** –8.063*** –18.332*** –8.431 (2.104) (2.077) (2.729) (23.853) Observations 72 72 72 72 R-squared 0.955 0.955 0.964 0.967 Within R-squared 0.094 0.095 0.284 0.334 Country fixed effects Yes Yes Yes Yes Year fixed effects Yes Yes Yes Yes Country trends Yes Yes Yes Yes Clusters (country) 6 6 6 6 Model 1 2 Treated × Post –0.147* –0.14 (0.058) (0.04 Log final gas consumption 0.617** 0.61 (0.237) (0.26 Log gas price –0.00 (0.10 Log final electricity generation Log gas electricity generation Log renewable electricity generation Log solid fossil fuel generation Log population Log GDP per capita Constant –8.060*** –8.06 (2.104) (2.07 Observations 72 72 R-squared 0.955 0.95 Within R-squared 0.094 0.09 Country fixed effects Yes Yes Year fixed effects Yes Yes Country trends Yes Yes Clusters (country) 6 6 Model 1 2 3 Treated × Post –0.147* –0.148** –0.21 (0.058) (0.046) (0.08 Log final gas consumption 0.617** 0.615* 0.4 (0.237) (0.263) (0.35 Log gas price –0.005 0.13 (0.102) (0.11 Log final electricity generation 1.15 (0.56 Log gas electricity generation 0.03 (0.03 Log renewable electricity generation 0.18 (0.10 Log solid fossil fuel generation –0.00 (0.00 Log population Log GDP per capita Constant –8.060*** –8.063*** –18.33 (2.104) (2.077) (2.72 Observations 72 R-squared 0.955 0.955 0.96 Within R-squared 0.094 0.095 0.28 Country fixed effects Yes Year fixed effects Yes Country trends Yes Clusters (country) 6 Model 1 2 3 4 Treated × Post –0.147* –0.148** –0.215** –0.26 (0.058) (0.046) (0.083) (0.07 Log final gas consumption 0.617** 0.615* 0.411 0.41 (0.237) (0.263) (0.355) (0.32 Log gas price –0.005 0.130 0.06 (0.102) (0.119) (0.14 Log final electricity generation 1.154* 0.78 (0.566) (0.34 Log gas electricity generation 0.039 0.04 (0.031) (0.04 Log renewable electricity generation 0.184 (0.106) (0.09 Log solid fossil fuel generation –0.009 (0.009) (0.01 Log population –2.19 (2.90 Log GDP per capita 1.06 (0.54 Constant –8.060*** –8.063*** –18.332*** –8.43 (2.104) (2.077) (2.729) (23.85 Observations 72 R-squared 0.955 0.964 Within R-squared 0.094 0.095 0.284 0.33 Country fixed effects Yes Year fixed effects Yes Country trends Yes Clusters (country) 6 –0.148** –0.215** –0.267** Model 1 2 3 4 Treated × Post –0.147* –0.148** –0.215** –0.267** (0.058) (0.046) (0.083) (0.073) Log final gas consumption 0.617** 0.615* 0.411 0.416 (0.237) (0.263) (0.355) (0.325) Log gas price –0.005 0.130 0.068 (0.102) (0.119) (0.141) Log final electricity generation 1.154* 0.789* (0.566) (0.344) Log gas electricity generation 0.039 0.048 (0.031) (0.044) Log renewable electricity generation 0.184 0.188* (0.106) (0.092) Log solid fossil fuel generation –0.009 –0.001 (0.009) (0.013) Log population –2.191 (2.902) Log GDP per capita 1.065 (0.549) Constant –8.060*** –8.063*** –18.332*** –8.431 (2.104) (2.077) (2.729) (23.853) Observations 72 72 72 72 R-squared 0.955 0.955 0.964 0.967 Within R-squared 0.094 0.095 0.284 0.334 Country fixed effects Yes Yes Yes Yes Year fixed effects Yes Yes Yes Yes Country trends Yes Yes Yes Yes Clusters (country) 6 6 6 6 ln(ElectricityPriceit) = β1 (Treatedi × Postt) + X′ it β + αi + γt + δit + εit
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