What do we know about how households' energy demands respond to changing energy prices in UK Regions?

McIntyre, Stuart G. (2017) What do we know about how households' energy demands respond to changing energy prices in UK Regions? In: 57th Congress of the European Regional Science, 2017-08-29 - 2017-09-01, University of Groningen.

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Abstract

A large body of literature has explored the production side of the energy sector at a regional level, and more generally geographic variation in electricity production and employment. Meanwhile, little attention appears to have been paid to exploring whether regional differences exist on the consumer side. In this paper we begin by exploring the available aggregate data for each UK region to better understand whether there exists evidence of differences in household behaviour with respect to energy consumption and use. Given differences in the composition of households across UK regions, we then estimate a demand model which controls for observable characteristics of households to explore whether there is any evidence of regional differences between how households' electricity and gas demands respond to changes in energy prices and household income. This is done using the UK Living Cost and Food (LCF) survey and estimate a Quasi-Almost Ideal Demand System. Evidence on whether there are these regional differences is important given the wide variety of energy-economy-environment modelling that takes place at a regional level, particularly in the UK. More generally, evidence of regional variation in how households respond to changing energy prices has important implications for the use of price (through applying a tax on the use of energy) as an instrument of energy policy. In the UK, there are a number of dimensions of energy policy which, while intended to be spatially blind, have a distinct spatially differentiated impact. This makes understanding any regional differences important in understanding the impact of these policies.

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