Heating Demand in the Residential Sector: Tackling the Enigma of Low Price Elasticity of Homeowners’ Expenses1

Th is paper presents fi ndings from our study which explored the price elasticities for domestic space heating energy of households in Germany. We focus upon the diff erence in price elasticities between homeowners and tenants found in previous studies in order to further elaborate on this. Using panel data from the GSOEP we perform fi xed eff ects and OLS regressions to examine the infl uencing factors yielding the diff erence in heating price elasticities between homeowners and tenants. Our results suggest that the diff erence in the heating price elasticities is to a great extent the result of diff ering initial consumption levels from homeowners and tenants. Understanding the reactions of households to rising energy prices according to various household types and initial levels of consumption and expenses is helpful in designing more target-oriented policy measures in order to reduce CO2 emissions. We show that per capita heat energy consumption is highest for homeowners of detached buildings which has increased in the past few years rather than decreased. Th is leads to lower price elasticities for homeowners in comparison to tenants. Reduction policies thus should have a stronger focus on the group of homeowners of detached buildings