Elsevier

Economic Modelling

Volume 90, August 2020, Pages 273-287
Economic Modelling

Air conditioning and electricity expenditure: The role of climate in temperate countries

https://doi.org/10.1016/j.econmod.2020.05.001Get rights and content
Under a Creative Commons license
open access

Highlights

  • The threat of global warming is one of the most urgent issues facing humanity today.

  • Households respond to increasingly hot climate conditions by adopting and using air conditioning.

  • Households spend 35%–42% more on electricity when they own air conditioners.

  • Air conditioning can drive low-income households into energy poverty.

Abstract

This paper investigates how households adopt and use air conditioning to adapt to climate change and increasingly high temperatures, which pose a threat to the health of vulnerable populations. The analysis examines conditions in eight temperate, industrialized countries (Australia, Canada, France, Japan, the Netherlands, Spain, Sweden, and Switzerland). The identification strategy exploits cross-country and cross-household variations by matching geocoded households with climate data. Our findings suggest that households respond to excess heat by purchasing and using air conditioners, leading to increased electricity consumption. Households on average spend 35%–42% more on electricity when they adopt air conditioning. Through an illustrative analysis, we show that climate change and the growing demand for air conditioning are likely to exacerbate energy poverty. The number of energy poor who spend a high share of income on electricity increases, and households in the lowest income quantile are the most negatively affected.

Keywords

Control function
Climate
Adaptation
Energy demand

JEL classification

N5
O13
Q1
Q54

Cited by (0)

This paper has received funding from the European Research Council (ERC) under the European Union's Horizon 2020 research and innovation programme under grant agreement No 756194 (ENERGYA). The authors would like to thank Irene Mammi, Francesco Vona, two anonymous referees and the Editors for very helpful comments and suggestions.The dataset used for this study – the 2011 Environmental Policy and Individual Behaviour Change Survey (EPIC) – is available from the OECD upon request. The analysis was performed using Stata 15.0 and R 3.5.0. The code is available to bona fide researchers from the authors upon request. The views expressed in the paper are those of the authors.