CHAPTER 1: INTRODUCTION
1.1 The Objectives of this Study
The primary objective of this study is to provide an analysis of the factors that affect
energy use in the household sector1
in Ireland. Energy is a commodity2 which is vital
for the existence of modern life. Without the availability of energy, we could not use
gas or oil to heat our homes, electricity to cook our food and petrol to drive our cars.
The advent of modern living has meant that energy is becoming an increasingly
important commodity and society has now become crucially dependent on its ease of
availability and secure supply. The beginning of this century has seen a large degree
of uncertainty emerge over the future prospects for energy use globally. The recent
slowdown in the global economy has tempered this uncertainty somewhat, however
the International Energy Agency in its most recent World Energy Outlook (2012)
publication suggest that demand for energy will continue to grow strongly, increasing
by one-third over the period to 2035 particularly due to the increased demand from
China, India and the Middle East.
The current research into the economics of energy use spans a wide variety of
different topics. The majority tend to concentrate on macroeconomic issues, for
example, investigating the causal relationship between economic activity and energy
consumption (see Ozturk, 2010 for a survey), the effects of climate change (Stern,
1 Throughout this study, both the words ‗household‘ and ‗residential‘ will be used interchangeably and
are taken to mean the same thing. However precedence will be given to using ‗household‘ as this better
reflects the micro focus of this study whereas the word ‗residential‘ is more associated with a macro
focus i.e. the residential sector.
For the purposes of this study, energy is a commodity just like clothes or food and thus energy use is
taken to mean the consumption of it by the end user i.e. the household. For example the energy used to
heat our homes is based on the purchase and consumption of oil or gas or solid fuel. To drive our car
we need to purchase petrol or diesel.
2006) and the effects of environmental policy measures such as a carbon tax (Wier et
al., 2005, Kerkhof et al., 2008 and Callan et al., 2009). However there is a growing
trend toward the use of household survey or micro level data as it can provide richer
sources of information and opportunities to develop a deeper understanding of the
factors affecting energy use. For example, Yun and Steemers (2011) and Musti et al.
(2011) are two recent studies which use micro level data to analyse the behavioural
aspects of household energy use.
This study will also utilise a micro level data set, the Irish Household Budget Survey
(HBS) which is collected and disseminated by the Central Statistics office (CSO) in
Ireland. This is a survey of Irish households which seeks to identify patterns of
weekly expenditures across a large variety of commodities. Information related to
energy use by Irish households is provided in a number of ways. Firstly, weekly
expenditures on various fuels are recorded in the HBS under the heading of ‗fuel and
light‘ which is taken to mean energy used in the home for power, heat and light. The
main fuels recorded under this heading include gas, electricity, oil, coal, turf, and
. In addition to the energy expenditures recorded under the ‗fuel and light‘
category the HBS also records expenditures under the ‗transport‘ category, namely,
petrol and diesel, which for the purposes of this study, will also be considered a
purchase by a household of an energy commodity. The HBS also records a certain
amount of qualitative information with regard to capital stock of energy using
equipment in the home. This includes detail on the type of central heating used (e.g.
gas, oil or solid fuel based) and the type of fuel used for water heating and cooking
AN ANALYSIS OF THE determinants OF HOUSEHOLD ENERGY EXPENDITURES: EMPIRICAL EVIDENCE FROM THE IRISH HOUSEHOLD BUDGET SURVEY
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