Description:
AbstractThe demand for energy is not simply a function of price and income, but can be shown to also be a function of the underlying energy demand trend (UEDT). The UEDT not only captures behavioural responses to non‐fiscal instruments, including technological change, but also encapsulates attitudinal responses/changes in demand that might result, for instance, from increased public awareness of how environmentally damaging energy use can be; hence, reflecting underlying consumer preferences.This study estimates a longitudinal econometric model for the aggregate demand functions of a sample of 17 Organisation for Economic Co‐operation and Development countries for the period 1960–2005. This approach to modelling will enable UEDTs to be observed for each of the countries, as well as normal price and income elasticities. The model results will provide an indication of the extent to which price/income‐based instruments can be used to reduce the demand for energy, as well as indicating the extent to which consumers have responded to non‐price/income instruments.