Modelling OECD Industrial Energy Demand: Asymmetric Price Responses and Energy – Saving Technical Change

The industrial sector embodies a multifaceted production process consequently modelling the ‘derived demand’ for energy is a complex issue; made all the more difficult by the need to capture the effect of technical progress of the capital stock. This paper is an exercise in econometric modelling of industrial energy demand using panel data for 15 OECD countries over the period 1962 – 2003 exploring the issue of energy-saving technical change and asymmetric price responses. Although difficult to determine precisely, it is tentatively concluded that the preferred specification for OECD industrial energy demand incorporates asymmetric price responses but not exogenous energysaving technical change.