Research article

The dynamic response of coal consumption to energy prices and GDP: An ARDL approach to the U.S.

  • Received: 30 April 2020 Accepted: 26 September 2020 Published: 06 November 2020
  • The U.S. coal industry is subject to regulatory policies at both the national and state levels. Coal consumption and demand from power plants will continue to decline over the next decade in the opposite direction of Trump administration's coal revival policy [1]. Therefore, it is crucial to understand fuel substitution from coal to natural gas in the U.S. energy market. Previous literature on linkages between energy prices, economic activities and energy use lack estimates of linkages between coal, natural gas prices, and coal consumption. Accordingly, this study utilizes an Autoregressive Distributed Lag (ARDL) model to establish linkages with a monthly time series dataset of the U.S over the period 2000–2016. The main research outcomes are: (i) there exists long-run linkages among the coal consumption, coal price, the price of natural gas, economic growth, and weather conditions, (ii) coal price and price of natural gas have negative and positive linkages with consumption of coal, respectively, (iii) economic growth has a negative impact on coal demand in the long run, (iv) the speed of adjustment of the system will move towards equilibrium path rapidly, and (v) solar energy and weather both have significant negative effects on coal consumption over the entire time period. A relatively high-income elasticity of coal demand implies that a growing U.S. economy is more likely to adopt a clean energy source.

    Citation: Mousa Tawfeeq, Alan R. Collins, Adam Nowak. The dynamic response of coal consumption to energy prices and GDP: An ARDL approach to the U.S.[J]. AIMS Energy, 2020, 8(6): 1156-1172. doi: 10.3934/energy.2020.6.1156

    Related Papers:

  • The U.S. coal industry is subject to regulatory policies at both the national and state levels. Coal consumption and demand from power plants will continue to decline over the next decade in the opposite direction of Trump administration's coal revival policy [1]. Therefore, it is crucial to understand fuel substitution from coal to natural gas in the U.S. energy market. Previous literature on linkages between energy prices, economic activities and energy use lack estimates of linkages between coal, natural gas prices, and coal consumption. Accordingly, this study utilizes an Autoregressive Distributed Lag (ARDL) model to establish linkages with a monthly time series dataset of the U.S over the period 2000–2016. The main research outcomes are: (i) there exists long-run linkages among the coal consumption, coal price, the price of natural gas, economic growth, and weather conditions, (ii) coal price and price of natural gas have negative and positive linkages with consumption of coal, respectively, (iii) economic growth has a negative impact on coal demand in the long run, (iv) the speed of adjustment of the system will move towards equilibrium path rapidly, and (v) solar energy and weather both have significant negative effects on coal consumption over the entire time period. A relatively high-income elasticity of coal demand implies that a growing U.S. economy is more likely to adopt a clean energy source.


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