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.
Highlights
Is the global economys appetite for energy insatiable? Will energy demand continue to grow as it has over the last two hundred years? In order to address growing concerns about both energy security and climate stability, it is important to anticipate and analyze future long run trends in energy consumption
This is because a 1% efficiency improvement leads to a 1% reduction in energy service prices, and, if energy consumption remains unchanged following a 1% efficiency improvement, energy service consumption must have risen by 1%, and, this implies that the price elasticity of demand for the energy service must be one
*: ‘Expected’ growth rates are based on unit income and price elasticities
Summary
In order to identify trends in the long-run demand for energy services we need to have data on prices and consumption of heating, transport, and lighting fuels; energy technologies and their efficiencies; and variables such as population and income that help to explain patterns in the consumption of energy services. This means that the costs of using different fuels and producing services are broadly comparable across time Based on these data sources and methods, the remainder of this section presents and discusses general and sector-specific trends in the consumption of energy services between 1700 and 2000, which will be used to estimate elasticities . In 2000, 1,200 trillion lumen hours were consumed, increasing to more than 1,800 trillion by 2010 – nearly a 20,000-fold increase in consumption per person since 1800
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