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

Mousa Tawfeeq; Alan R. Collins; Adam Nowak; Mousa Tawfeeq; Alan R. Collins; Adam Nowak

doi:10.3934/energy.2020.6.1156

AIMS Energy

2020, Volume 8, Issue 6: 1156-1172. doi: 10.3934/energy.2020.6.1156

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Research article

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

1.
Economics and Business College and Division of Resource Economics and Management, Davis College of Agriculture Natural Resources & Design, 4307 Agricultural Science Building, PO BOX 6108, West Virginia University, WV, 2605-6108, USA
2.
Division of Resource Economics and Management, Davis College of Agriculture Natural Resources & Design, 4212 Agricultural Science Building, PO BOX 6108, West Virginia University, WV, 2605-6108, USA
3.
Economics Department, College of Business and Economics, WVU, Morgantown, WV, USA

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.
- coal consumption,
- coal price natural gas,
- autoregressive distributive lag
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

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Abstract

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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