FEEM working papers "Note di lavoro" series
2007 .046

The Impact of Temperature Change on Energy Demand: A Dynamic Panel Analysis


Authors: Enrica De Cian, Elisa Lanzi, Roberto Roson  
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Energy Demand, Cooling Heating Effect , Temperature, Dynamic Panel
JEL n.: C3, Q41, Q54
JEL: Climatic Change

Abstract

This paper presents an empirical study of energy demand, in which demand for a series of energy goods (Gas, Oil Products, Coal, Electricity) is expressed as a function of various factors, including temperature. Parameter values are estimated econometrically, using a dynamic panel data approach. Unlike previous studies in this field, the data sample has a global coverage, and special emphasis is given to the dynamic nature of demand, as well as to interactions between income levels and sensitivity to temperature variations. These features make the model results especially valuable in the analysis of climate change impacts. Results are interpreted in terms of derived demand for heating and cooling. Non-linearities and discontinuities emerge, making it necessary to distinguish between different countries, seasons, and energy sources. Short- and long-run temperature elasticities of demand are estimated.

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