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International Handbook on the Economics of Energy

Edited by Joanne Evans and Lester C. Hunt

As an essential component for economic growth, energy has a significant impact on the global economy. The need to meet growing energy demand has prompted cutting-edge innovation in clean technology in an attempt to realise environmental and cost objectives, whilst ensuring the security of energy supply. This Handbook offers a comprehensive review of the economics of energy, including contributions from a distinguished array of international specialists. It provides a thorough discussion of the major research issues in this topical field of economics.
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Chapter 6: Empirical Modelling of Energy Demand

David L. Ryan and André Plourde


David L. Ryan and André Plourde* 1 Introduction One of the consequences of the first world oil shock in the early 1970s was a marked increase in the empirical modelling of energy demand. There appear to be at least four primary motivations for this. First, there is the question of the magnitude of demand responses as a result of price changes and income changes that may occur. Clearly these responses can have important implications for policy analysis, since any type of tax would generally raise the price and hence affect demand, as would increases in income, perhaps as a country develops. Second, there is a general interest in forecasting or predicting future energy needs, and such forecasts are generally anchored in knowledge of what has happened in the past, how past demand behaviour depends on various factors and expectations about how those factors might change in the future. Third, while energy seldom plays the same role in economic analysis as labour and capital, there is a general understanding that without energy there would be no production, so that issues of the extent to which energy can be substituted in the production (or other) process have become an important consideration. Fourth, with increasing concern over greenhouse gas (GHG) emissions and climate change, which tend to be largely associated with energy production and consumption, questions of how demand for energy can be curtailed, or converted to forms associated with fewer emissions have received increased prominence. Driven by such considerations as computing power,...

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