Determinants of Energy Demand for Heating in the European Residential Sector

Abstract

The improvement of energy e ciency is one of the key targets of EU energy policy. In order to design and implement e cient energy policy, information on energy demand price and income elasticities is required. This thesis puts forward a stylized theoretical model of residential energy demand and empirically examines space heating demand from 1990 to 2015 in six European countries (France, Germany, Italy, Spain, Sweden, and the UK). By use of dynamic panel data models, the short-run and long-run price elasticities for space heating are estimated to -0.21 and -0.44 respectively, suggesting an inelastic demand with some room for discouraging energy consumption using price increases. The corresponding income elasticities are estimated to 0.16 and 0.43. The elasticities are smaller for electricity demand and robust over estimation techniques. The inclusion of additional sets of variables into the model suggests that energy performance standards and nancial incentives also play important roles in promoting energy savings, whereas informative measures do not yield a signi cant impact.