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Lessons from energy history for climate policy: technological change, demand and economic development

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  • Fouquet, Roger

Abstract

This paper draws lessons from long run trends in energy markets for energy and climate policy. An important lesson is that consumer responses to energy markets change with economic development. The British experience suggests that income elasticities1 of demand for energy services have tended to follow an inverse-U shape curve. Thus, at low levels of economic development, energy service consumption tends to be quite responsive to per capita income changes; at mid-levels, consumption tends to be very responsive to changes in income per capita; and, at high levels, consumption is less responsive to income changes. The paper also highlights the importance of formulating integrated energy service policies to reduce risks to developing countries of locking-in to carbon intensive infrastructure or behaviour. Without guidance and incentives, rapid economic development is likely to lock consumers into high energy service prices in the long run and bind the economy onto a high energy intensity trajectory with major long run economic and environmental impacts. Thus, effective energy service policies in periods of rapid development, such as in China and India at present, are crucial for the long run prosperity of the economy and their future ability to mitigate carbon dioxide emissions.

Suggested Citation

  • Fouquet, Roger, 2016. "Lessons from energy history for climate policy: technological change, demand and economic development," LSE Research Online Documents on Economics 67785, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:67785
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    File URL: http://eprints.lse.ac.uk/67785/
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    6. Sylwia Słupik & Joanna Kos-Łabędowicz & Joanna Trzęsiok, 2021. "Are You a Typical Energy Consumer? Socioeconomic Characteristics of Behavioural Segmentation Representatives of 8 European Countries," Energies, MDPI, vol. 14(19), pages 1-28, September.
    7. Rubio-Varas, Mar & Muñoz-Delgado, Beatriz, 2017. "200 years diversifying the energy mix? Diversification paths of the energy baskets of European early comers vs. latecomers," Working Papers in Economic History 2017/01, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    8. Popescu, Gheorghe H. & Mieila, Mihai & Nica, Elvira & Andrei, Jean Vasile, 2018. "The emergence of the effects and determinants of the energy paradigm changes on European Union economy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P1), pages 768-774.
    9. Sutrisno, Aziiz & Nomaler, Ӧnder & Alkemade, Floor, 2021. "Has the global expansion of energy markets truly improved energy security?," Energy Policy, Elsevier, vol. 148(PA).
    10. Benedikt Bruckner & Klaus Hubacek & Yuli Shan & Honglin Zhong & Kuishuang Feng, 2022. "Impacts of poverty alleviation on national and global carbon emissions," Nature Sustainability, Nature, vol. 5(4), pages 311-320, April.
    11. Soytas, Ugur & Magazzino, Cosimo & Mele, Marco & Schneider, Nicolas, 2022. "Economic and environmental implications of the nuclear power phase-out in Belgium: Insights from time-series models and a partial differential equations algorithm," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 241-256.
    12. Jan Fagerberg & Håkon Endresen Normann, 2022. "Innovation policy, regulation and the transition to net zero," Working Papers on Innovation Studies 20220531, Centre for Technology, Innovation and Culture, University of Oslo.
    13. Sovacool, Benjamin K., 2017. "Contestation, contingency, and justice in the Nordic low-carbon energy transition," Energy Policy, Elsevier, vol. 102(C), pages 569-582.
    14. Sylwia Słupik & Joanna Kos-Łabędowicz & Joanna Trzęsiok, 2021. "Energy-Related Behaviour of Consumers from the Silesia Province (Poland)—Towards a Low-Carbon Economy," Energies, MDPI, vol. 14(8), pages 1-23, April.
    15. Herve Bercegol & Henri Benisty, 2020. "An energy-based macroeconomic model validated by global historical series since 1820," Papers 2008.10967, arXiv.org, revised Sep 2020.
    16. Oluyomi A. Osobajo & Afolabi Otitoju & Martha Ajibola Otitoju & Adekunle Oke, 2020. "The Impact of Energy Consumption and Economic Growth on Carbon Dioxide Emissions," Sustainability, MDPI, vol. 12(19), pages 1-16, September.
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    19. Fadiran, Gideon & Fadiran, David & Ibn-Mohammed, Taofeeq, 2017. "Macroeconomic Policy effects on development transition – Views from Agent based model," MPRA Paper 103197, University Library of Munich, Germany, revised Dec 2018.
    20. Duraisamy Pachiyappan & Yasmeen Ansari & Md Shabbir Alam & Prabha Thoudam & Kuppusamy Alagirisamy & Palanisamy Manigandan, 2021. "Short and Long-Run Causal Effects of CO 2 Emissions, Energy Use, GDP and Population Growth: Evidence from India Using the ARDL and VECM Approaches," Energies, MDPI, vol. 14(24), pages 1-17, December.
    21. Bercegol, Hervé & Benisty, Henri, 2022. "An energy-based macroeconomic model validated by global historical series since 1820," Ecological Economics, Elsevier, vol. 192(C).
    22. August Wierling & Valeria Jana Schwanitz & Jan Pedro Zeiß & Celine Bout & Chiara Candelise & Winston Gilcrease & Jay Sterling Gregg, 2018. "Statistical Evidence on the Role of Energy Cooperatives for the Energy Transition in European Countries," Sustainability, MDPI, vol. 10(9), pages 1-25, September.
    23. Nielsen, Hana & Warde, Paul & Kander, Astrid, 2018. "East versus West: Energy intensity in coal-rich Europe, 1800–2000," Energy Policy, Elsevier, vol. 122(C), pages 75-83.

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    Keywords

    energy history; energy transitions; economic development; climate policy;
    All these keywords.

    JEL classification:

    • N0 - Economic History - - General

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