UC Berkeley

This paper reviews the literature on the relationship between climate and the energy sector. In particular, we primarily discuss empirical papers published in peer-reviewed economics journals focusing on how climate affects energy expenditures and consumption. Climate will affect energy consumption by changing how consumers respond to short run weather shocks (the intensive margin) as well as how people will adapt in the long run (the extensive margin). Along the intensive margin, further research that uses household and firm-level panel data of energy consumption may help identify how energy consumers around the world respond to weather shocks. Research on technology adoption, e.g. air conditioners, will further our understanding of the extensive margin adjustments and their costs. We also note that most of the literature focuses on the residential sector. Similar studies are urgently needed for the industrial and commercial sectors.