Long-Run Demand for Energy Services: Income and Price Elasticities over Two Hundred Years

By R. Fouquet. Review of Environmental Economics and Policy, 2014

142 citations recorded by the source corpus.

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. (JEL: Q41, N73, N74, D12)

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/0fa59e14c8216f48533cb7cf38c2a105b98de0d1

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Citations in the corpus

A meta-analysis on the price elasticity of energy demand (2017, unknown): “In this sense, Fouquet (2014) considers that price elasticities follow a U-shaped evolution as the economy grows, even though numerous factors such as the increasing consumption of energy services, the access to the market of energy services of the poorer population segments, or the changes in the…”
Assessing the Effectiveness of Energy Efficiency Measures in the Residential Sector Gas Consumption Through Dynamic Treatment Effects: Evidence from England and Wales (2022, methodology): “…studying the drivers and factors affecting UK energy demand – mostly price elasticity studies for gas and (mainly) electricity consumption-relying on different types of ex-post data (See Cuce, 2016; Fouquet, 2014; Chitnis et al., 2020; Asche et al., 2008; Serletis et al., 2011; among others).”
Historical energy price shocks and their changing effects on the economy (2017, methodology): “Fouquet (2014) uses a VECM (vector error correcting) model to explore the long-term development of income and price elasticities, whereas Pindyck (1999) and Cashin and Mcdermott (2002) employ stochastic models in order to detect trendsinthelongrunevolutionofenergyprices.”
Air conditioning and electricity expenditure: The role of climate in temperate countries (2020, background): “Average annual income also influences electricity expenditures, though the elasticity is small, in line with the empirical evidence that suggests declining elasticities of key energy services once income reaches certain thresholds (Fouquet, 2014).”
Energy expenditure, economic growth, and the minimum EROI of society (2016, methodology): “We also compare our energy expenditure estimates for the US and world with the one for the UK calculated from 1300 to 2008 using data from Fouquet (2008, 2011, 2014).”
Fossil-fueled development (SSP5): An energy and resource intensive scenario for the 21st century (2017, unknown): “Historically, energy intensity of economic output decreased and per capita energy use increased with increasing GDP per capita levels (Grübler et al., 2012; Fouquet, 2014).”
Income inequality and carbon consumption: Evidence from Environmental Engel curves (2019, background): “Fouquet (2014) finds that long-run income elasticities for energy services (domestic heating, lighting, passenger transport) are rising up to a point and subsequently tend towards zero.”
How much energy will buildings consume in 2100? A global perspective within a scenario framework (2018, background): “We assume that the elasticity will tend towards 0.3 in the long run, which is in the low range of current income elasticity for energy services computed for the United Kingdom [35].”
Historical energy transitions: Speed, prices and system transformation ☆ (2016, background): “Journal of the Association of Environmental and Resource Economists, 2(1) 93-132. van de Ven, D.J. and R. Fouquet (2014) Historical Energy Shocks and their Economic Impact.”