Abstract

A set of aggregate energy demand equations is estimated for the United Kingdom and 'consensus' price elasticities are imposed in the estimation. The relationship between the imposed lags in response and the magnitude of the price elasticities is explored and it is shown that the data do not reject quite substantial long-term responses to price changes for some energy users. The implications of different price elasticities for the analysis of abatement policies is treated in the context of a projection of the effects of the European Union's carbon/ energy tax on UK energy demand and CO2 emissions to the year 2005. A fall of 12 per cent is projected in emissions below the level in the business-as-usual projection in 2005, even with zero aggregate energy price elasticities for all users as a result of fuel substitution and early retirement of coal-burning plants in the electricity industry. If high aggregate price elasticities are assumed, the reduction below base is 18 per cent in 2005.

0 0

Post a comment