What changes energy consumption? Prices and public pressures

Abstract

Policymakers often seek to limit energy prices following market shocks, and instead issue public appeals to reduce demand. This article presents new evidence on how price changes and conservation appeals affect energy consumption, using household-level data from California's energy crisis during 2000 and 2001. The evidence indicates that when policymakers cap energy prices following market shocks, they preclude substantial - and quite rapid - reductions in energy use. The data also reveal that conservation appeals and informational programs can produce sustained reductions in energy demand. Copyright © 2008, RAND.