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The Impact of Temperature Changes on Residential Energy Use

  • Richard S. J. Tol

    ()

    (Department of Economics, University of Sussex, UK
    Institute for Environmental Studies, Vrije Universiteit, Amsterdam, Netherlands
    Department of Spatial Economics, Vrije Universiteit, Amsterdam, Netherlands)

  • Sebastian Petrick

    ()

    (Kiel Institute for the World Economy)

  • Katrin Rehdanz

    (Kiel Institute for the World Economy
    Department of Economics, Christian-Albrechts-University Kiel, Germany)

In order to explore the impact of climate change on energy use, we estimate an energy demand model that is driven by temperature, prices and income. The estimation is based on an unbalanced panel of 62 countries over three decades. We limit the analysis to the residential sector and distinguish four different fuel types (coal, electricity, natural gas and oil). Compared to previous papers, we have a better geographical coverage and consider both a heating and cooling threshold as well as further non-linearities in the impact of temperature on energy demand and temperature-income interactions. We find that oil, gas and electricity use are driven by a non-linear heating effect: Energy use decreases with rising temperatures due to a reduced demand for energy for heating purposes, but the speed of that decrease declines with rising temperature levels. We cannot find a significant impact of temperature on the demand for cooling energy.

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Paper provided by Department of Economics, University of Sussex in its series Working Paper Series with number 4412.

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Date of creation: Nov 2012
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Handle: RePEc:sus:susewp:4412
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