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CERE - the Center for Environmental and Resource Economics CERE Working Papers, CERE - the Center for Environmental and Resource Economics

No 2013:5:
A cross-country analysis of residential electricity demand in 11 OECD-countries

Chandra Kiran B Krishnamurthy () and Bengt Kriström ()

Abstract: We provide consistent, cross-country estimates of price and income elasticity for the residential sector of 11 OECD countries. Using survey data from 2011 on annual consumption of electricity and sample-derived average electricity price, we provide country-specific price elasticity estimates and average income elasticity estimates. For most countries in our sample, we find strong price responsiveness, with elasticities varying between -0:27 for South Korea and -1:4 for Australia, with most countries elasticity being above (in absolute value) -0:5. Exploiting the presence of many attitudinal indicators, we find evidence for non-price related factors, in particular households’self-reported energy saving behavior, to reduce energy demand between 2 and 4%. In contrast, we find very weak income response, with income elasticities varying from 0:07 to 0:14 and no evidence for heterogeneity across the countries in our sample. Our results regarding price elasticity are in contrast with many existing studies which find low-to-moderate price responsiveness, and adds to a few recent studies indicating more policy space for demand reduction than previously thought.

Keywords: Residential Electricity Demand; Price Elasticity; (follow links to similar papers)

JEL-Codes: D12; Q41; (follow links to similar papers)

30 pages, August 14, 2013, Revised June 30, 2014

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