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How Will Energy Demand Develop in the Developing World?

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  • Catherine Wolfram
  • Orie Shelef
  • Paul Gertler

Abstract

Over the next 25 to 30 years, nearly all of the growth in energy demand, fossil fuel use, associated local pollution, and greenhouse gas emissions is forecast to come from the developing world. This paper argues that the world's poor and near-poor will play a major role in driving medium-run growth in energy consumption. As the world economy expands and poor households' incomes rise, they are likely to get connected to the electricity grid, gain access to good roads, and purchase energy-using assets like appliances and vehicles for the first time. We argue that the current forecasts for energy demand in the developing world may be understated because they do not accurately capture growth in demand along the extensive margin, as low-income households buy their first durable appliances and vehicles. Within a country, the adoption of energy-using assets typically follows an S-shaped pattern: among the very poor, we see little increase in the number of households owning refrigerators, vehicles, air conditioners, and other assets as incomes go up; above a first threshold income level, we see rapid increases of ownership with income; and above a second threshold, increases in ownership level off. A large share of the world's population has yet to go through the first transition, suggesting there is likely to be a large increase in the demand for energy in the coming years.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.26.1.119
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 26 (2012)
Issue (Month): 1 (Winter)
Pages: 119-38

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Handle: RePEc:aea:jecper:v:26:y:2012:i:1:p:119-38

Note: DOI: 10.1257/jep.26.1.119
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Citations

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Cited by:
  1. Boomhower, Judson & Davis, Lucas W., 2014. "A credible approach for measuring inframarginal participation in energy efficiency programs," Journal of Public Economics, Elsevier, vol. 113(C), pages 67-79.
  2. Gerard, Francois, 2013. "What Changes Energy Consumption, and for How Long? New Evidence from the 2001 Brazilian Electricity Crisis," Discussion Papers dp-13-06, Resources For the Future.
  3. Shoibal Chakravarty & Massimo Tavoni, 2013. "Energy Poverty Alleviation and Climate Change Mitigation: is There a Trade off?," Working Papers 2013.25, Fondazione Eni Enrico Mattei.
  4. Lucas W. Davis & Alan Fuchs & Paul J. Gertler, 2012. "Cash for Coolers," NBER Working Papers 18044, National Bureau of Economic Research, Inc.
  5. Siqi Zheng & Matthew E. Kahn, 2013. "Understanding China's Urban Pollution Dynamics," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 731-72, September.
  6. Voigt, Sebastian & De Cian, Enrica & Schymura, Michael & Verdolini, Elena, 2014. "Energy intensity developments in 40 major economies: Structural change or technology improvement?," Energy Economics, Elsevier, vol. 41(C), pages 47-62.
  7. Roger Fouquet, 2013. "Long Run Demand for Energy Services: the Role of Economic and Technological Development," Working Papers 2013-03, BC3.
  8. Alem, Yonas & Beyene, Abebe D. & Kohlin, Gunnar & Mekonnen, Alemu, 2013. "Household Fuel Choice in Urban Ethiopia: A Random Effects Multinomial Logit Analysis," Discussion Papers dp-13-12-efd, Resources For the Future.
  9. Michael Greenstone & B. Kelsey Jack, 2013. "Envirodevonomics: A Research Agenda for a Young Field," NBER Working Papers 19426, National Bureau of Economic Research, Inc.
  10. Chakravarty, Shoibal & Tavoni, Massimo, 2013. "Energy poverty alleviation and climate change mitigation: Is there a trade off?," Energy Economics, Elsevier, vol. 40(S1), pages S67-S73.

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