The ex post impact on household energy of an energy tax on household demand

This paper presents an econometric study dealing with household demand for energy in the Netherlands. The main objective of the paper is to present an estimation of the actual impact of an already implemented energy tax introduced in the Netherlands in 1996. The approach differs from the existing literature in that (1) it uses panel data for the same period in which the tax was introduced; and (2) it estimates a demand function that controls for a large set of variables, such as outside temperature, type of house and of house insulation, household cooking behavior, and an extensive number of durable goods and electrical appliances. The study concludes that, in the short term, the energy tax had a small but significant impact on energy consumption in the Netherlands. Concretely, the yearly average demand reduction was of 8% for electricity and 4.4% for gas. Additionally, the influence of variables other than price and income on household energy demand is discussed. Using this information, the impact that the energy tax had on household energy use can be compared with the energy reduction that could have been achieved when using other policy instruments.