Residential electricity demand in Japan

Estimation of own-price and income elasticities of electricity demand is crucial for researchers and policymakers. However, few empirical studies have examined Japan’s residential electricity demand, and none have analysed it using prefectural data accounting for electricity substitutes. This study estimates Japan’s residential electricity demand whilst controlling for electricity substitutes using prefectural data. The results indicate that long-run elasticities are more responsive than short-run elasticities, and that the own-price elasticity is larger than the income elasticity. Moreover, city gas, propane gas, and kerosene are electricity substitutes. This study concludes that carbon pricing and demand response scheme can work.