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Divergences in Long-Run Trends in the Prices of Energy and Energy Services

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  • Roger Fouquet

Abstract

This article presents new evidence on very long-run trends in the prices of energy and energy services, such as heat, power, transport, and light, using seven hundred years of data for the United Kingdom. The article has two main findings. First, it shows that, in general, there was an upward trend in average energy prices before the Industrial Revolution and a decline afterward, which was associated with the shift from traditional energy sources to fossil fuels. In the second half of the twentieth century, however, average energy prices did rise, reflecting not so much rising resource scarcity as greater value to consumers, as consumers shifted to energy sources that provided the desired services more efficiently. Second, the article highlights the dangers of focusing on the price of energy rather than the price of energy services when considering the long run. The price of energy ignores major technological improvements and their benefits to the consumer. This failure to focus on energy services is likely to lead to incorrect estimates of consumer responsiveness to changes in price and income. The article suggests that the inclusion of service prices and consumption variables would lead to more reliable models of long-run energy demand and forecasts of carbon dioxide emissions. ( Copyright 2011, Oxford University Press.

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  • Roger Fouquet, 2011. "Divergences in Long-Run Trends in the Prices of Energy and Energy Services," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(2), pages 196-218, Summer.
  • Handle: RePEc:oup:renvpo:v:5:y:2011:i:2:p:196-218
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    File URL: http://hdl.handle.net/10.1093/reep/rer008
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    Cited by:

    1. Fouquet, Roger, 2011. "Long run trends in energy-related external costs," Ecological Economics, Elsevier, vol. 70(12), pages 2380-2389.
    2. Ruta Gentvilaite & Astrid Kander & Paul Warde, 2014. "The Role of Energy Quality in Shaping Long-Term Energy Intensity in Europe," Energies, MDPI, Open Access Journal, vol. 8(1), pages 1-21, December.
    3. Aline Chiabai & Ibon Galarraga & Anil Markandya & Unai Pascual, 2013. "The Equivalency Principle for Discounting the Value of Natural Assets: An Application to an Investment Project in the Basque Coast," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(4), pages 535-550, December.
    4. 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.
    5. Kander, Astrid & Stern, David I., 2014. "Economic growth and the transition from traditional to modern energy in Sweden," Energy Economics, Elsevier, vol. 46(C), pages 56-65.
    6. van de Ven, Dirk Jan & Fouquet, Roger, 2017. "Historical energy price shocks and their changing effects on the economy," Energy Economics, Elsevier, vol. 62(C), pages 204-216.
    7. Fouquet, Roger, 2012. "Trends in income and price elasticities of transport demand (1850–2010)," Energy Policy, Elsevier, vol. 50(C), pages 62-71.
    8. Roger Fouquet & Peter J.G. Pearson, 2012. "The Long Run Demand for Lighting:Elasticities and Rebound Effects in Different Phases of Economic Development," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    9. Frieling, Julius & Madlener, Reinhard, 2017. "The Turning Tide: How Energy has Driven the Transformation of the British Economy Since the Industrial Revolution," FCN Working Papers 7/2017, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    10. Rühl, Christof & Appleby, Paul & Fennema, Julian & Naumov, Alexander & Schaffer, Mark, 2012. "Economic development and the demand for energy: A historical perspective on the next 20 years," Energy Policy, Elsevier, vol. 50(C), pages 109-116.
    11. Joanne Evans & Massimo Filippini & Lester C. Hunt, 2013. "The contribution of energy efficiency towards meeting CO2 targets," Chapters,in: Handbook on Energy and Climate Change, chapter 8, pages 175-223 Edward Elgar Publishing.
    12. Pierre-André Jouvet & Christian De Perthuis, 2017. "La croissance verte : de l’intention à la mise en oeuvre," Working Papers hal-01504973, HAL.
    13. John Foster, 2014. "Energy, knowledge and economic growth," Journal of Evolutionary Economics, Springer, pages 209-238.
    14. Hart, Rob, 2016. "Non-renewable resources in the long run," Journal of Economic Dynamics and Control, Elsevier, vol. 71(C), pages 1-20.
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    16. Fizaine, Florian & Court, Victor, 2016. "Energy expenditure, economic growth, and the minimum EROI of society," Energy Policy, Elsevier, vol. 95(C), pages 172-186.
    17. Grubler, Arnulf, 2012. "Energy transitions research: Insights and cautionary tales," Energy Policy, Elsevier, vol. 50(C), pages 8-16.
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    19. repec:dau:papers:123456789/10234 is not listed on IDEAS
    20. Fouquet, Roger, 2012. "The demand for environmental quality in driving transitions to low-polluting energy sources," Energy Policy, Elsevier, vol. 50(C), pages 138-149.
    21. Roger Fouquet, 2015. "Lessons from energy history for climate policy," GRI Working Papers 209, Grantham Research Institute on Climate Change and the Environment.
    22. Franco Ruzzenenti & Andreas A. Papandreou, 2015. "Effects of fossil fuel prices on the transition to a low-carbon economy," Working papers wpaper89, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    23. Fouquet, Roger, 2014. "Long run demand for energy services: income and price elasticities over two hundred years," LSE Research Online Documents on Economics 59070, London School of Economics and Political Science, LSE Library.
    24. Roger Fouquet, 2013. "Long Run Demand for Energy Services: the Role of Economic and Technological Development," Working Papers 2013-03, BC3.
    25. Fouquet, Roger, 2015. "The allocation of energy resources in the very long run," LSE Research Online Documents on Economics 62367, London School of Economics and Political Science, LSE Library.

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