Persistence and stationarity of sectoral energy consumption in the US: A confidence interval approach

Abstract

Energy consumption is the primary source of greenhouse gases and carbon emissions, so reduction of energy consumption in any sector of the economy can be used as a tool to fight against global warming. However, to do that satisfactorily, it is necessary to know the degree of persistence of sectoral energy consumption. In fact, the degree of persistence shows how much of impact of shocks carries over to the following periods. Therefore, in this paper, we analyze the persistence and stationarity of sectoral energy consumption in the United States during 1952-2016 using bootstrap and subsampling confidence intervals. These confidence intervals provide more information compared to the unit root tests. Not only they provide evidence about the stationarity or non-stationarity of the variables, but also they show the degree of persistence. In addition, they require fewer assumptions on the nature of data. The findings show that the energy consumption in the residential and commercial sectors appears to be stationary but persistent. On the contrary, the energy consumption in the industrial and transportation sectors is nonstationary. Therefore, the industrial and transportation sectors are the best candidates to implement energy conservation and economic or environmental-oriented policies, because the effect of these policies will be permanent. Similar policies can be applied in the residential and commercial sectors as well; however, the effects of shocks to these sectors will diminish eventually.