Long Run Demand for Energy Services: the Role of Economic and Technological Development

Abstract

This paper 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. It finds that the general trend in income elasticity followed an inverse U-shape curve and in price elasticity was a U-shape curve, as the economy developed and energy service prices fell. However, these general trends were disrupted by energy and technological transitions, which boosted demand (either by encouraging poorer consumers to fully enter the market or by offering new attributes of value to wealthier consumers). This evidence suggests that energy service consumption in developing economies is likely to continue rising rapidly and in industrialised countries is not likely to decline. Thus, in the absence of a full transition to low carbon energy sources and technologies, this implies long run increases in global carbon dioxide emissions.