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Long run demand for energy services: income and price elasticities over two hundred years

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  • Fouquet, Roger

Abstract

This article investigates how the demand for energy services has changed since the Industrial Revolution. It presents evidence on the income and price elasticities of demand for domestic heating, passenger transport, and lighting in the United Kingdom over the last two hundred years. As the economy developed and energy service prices fell, income elasticities have generally followed an inverse U-shape curve, and price elasticities have generally followed a U-shape curve. However, these general trends also appear to have been affected by energy and technological transitions, which boosted demand (by either encouraging poorer consumers to fully enter the market or offering new attributes of value to wealthier consumers). The evidence presented offers insights that will be helpful for identifying likely future trends in energy use and carbon dioxide emissions, and for developing long-term climate policies.

Suggested Citation

  • 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.
  • Handle: RePEc:ehl:lserod:59070
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    File URL: http://eprints.lse.ac.uk/59070/
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    Cited by:

    1. Raul Jimenez & Ariel Yépez-García, 2016. "Composition and Sensitivity of Residential Energy Consumption," IDB Publications (Working Papers) 95257, Inter-American Development Bank.
    2. Gregor Semieniuk, 2016. "Fossil energy in economic growth: A study of the energy direction of technical change, 1950-2012," SPRU Working Paper Series 2016-11, SPRU - Science and Technology Policy Research, University of Sussex.
    3. Diederik Dicou & Saskia van Ewijk & Jan Kakes & Martijn Regelink & Guido Schotten, 2016. "Time for Transition - an exploratory study of the transition to a carbon-neutral economy," DNB Occasional Studies 1402, Netherlands Central Bank, Research Department.
    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. Hunt, Lester C. & Ryan, David L., 2015. "Economic modelling of energy services: Rectifying misspecified energy demand functions," Energy Economics, Elsevier, vol. 50(C), pages 273-285.
    7. 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.
    8. Karimu, Amin & Brännlund, Runar & Lundgren, Tommy & Söderholm, Patrik, 2017. "Energy intensity and convergence in Swedish industry: A combined econometric and decomposition analysis," Energy Economics, Elsevier, vol. 62(C), pages 347-356.
    9. Labandeira, Xavier & Labeaga, José M. & López-Otero, Xiral, 2017. "A meta-analysis on the price elasticity of energy demand," Energy Policy, Elsevier, vol. 102(C), pages 549-568.
    10. Zsuzsanna Csereklyei, M. d. Mar Rubio-Varas, and David I. Stern, 2016. "Energy and Economic Growth: The Stylized Facts," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    11. 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).
    12. Carey W. King & John P. Maxwell & Alyssa Donovan, 2015. "Comparing World Economic and Net Energy Metrics, Part 1: Single Technology and Commodity Perspective," Energies, MDPI, Open Access Journal, vol. 8(11), pages 1-26, November.
    13. Schulte, Isabella & Heindl, Peter, 2017. "Price and income elasticities of residential energy demand in Germany," Energy Policy, Elsevier, vol. 102(C), pages 512-528.
    14. Lutz Sager, 2017. "Income inequality and carbon consumption: evidence from environmental Engel curves," GRI Working Papers 285, Grantham Research Institute on Climate Change and the Environment.
    15. Paul E. Brockway & Harry Saunders & Matthew K. Heun & Timothy J. Foxon & Julia K. Steinberger & John R. Barrett & Steve Sorrell, 2017. "Energy Rebound as a Potential Threat to a Low-Carbon Future: Findings from a New Exergy-Based National-Level Rebound Approach," Energies, MDPI, Open Access Journal, vol. 10(1), pages 1-24, January.
    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. 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.

    More about this item

    Keywords

    demand elasticity; energy use; income; price dynamics;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • N73 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: Pre-1913
    • N74 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: 1913-
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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