Drivers of rising global energy demand: The importance of spatial lag and error dependence

This paper analyzes key factors that led to rising global energy demand in recent decades. In addition to income and price elasticities traditionally examined, this research takes into account the effects of structural, demographic, technological and temperature changes on energy demand. Using newly developed panel data techniques allowing for spatial error and/or spatial lag dependence, this research finds evidence for the existence of spatial lag dependence, a positive but declining income elasticity, a negative price elasticity, and the significant effects of industry/service value added, urbanization and technical innovations on energy demand. This research has important implications for public policies that aim to encourage energy savings, develop service sector and promote energy-efficient technologies towards a sustainable energy future.