Short run price elasticity of residential electricity demand within income levels and the implications for CO2 policy
Green, Eric
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https://hdl.handle.net/2142/44178
Description
Title
Short run price elasticity of residential electricity demand within income levels and the implications for CO2 policy
Author(s)
Green, Eric
Issue Date
2013-05-24T21:53:29Z
Director of Research (if dissertation) or Advisor (if thesis)
Sullivan, William C.
Department of Study
Natural Res & Env Sci
Discipline
Natural Res & Env Sciences
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
M.S.
Degree Level
Thesis
Date of Ingest
2013-05-24T21:53:29Z
Keyword(s)
price elasticity
residential electricity demand
CO2 policy
income elasticity of demand
Abstract
This thesis investigates the relationship between price and use of electricity in residential homes in order to understand the impact of CO2 policy. A model is developed based on household, structural, regional, weather, and appliance variables. Data is collated from the Bureau of Labor Statistics, the National Oceanic and Atmospheric Administration and the Consumer Expenditure survey. The price elasticity of electricity demand is determined using generalized least squares regression analysis. Unlike other studies, the price of electricity is found to be insignificant in determining the demand of electricity. This study shows that price is only influential on demand for household incomes above $75,000. The expected impact on the residential sector of a price change from CO2 legislation is calculated. Only a portion of the population will respond to CO2 pricing policies, and the impact on demand for electricity of those households is low. It is determined that further investigation of the price elasticity of demand is necessary before implementing policy that uses price controls.
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