A spatial panel data approach to estimating U.S. state-level energy emissions

- We examine how economic activity affects U.S. state-level carbon dioxide emissions.
- We use spatial, panel data econometric models to control for spatial dependence.
- We test for different types of spatial dependence within the data.
- Economic distance affects state-level emissions.
- Statistically significant, positive economic and negative price spillovers.

We take advantage of a long panel data set to estimate the relationship between U.S. state-level carbon dioxide (CO2) emissions, economic activity, and other factors. We specify a reduced-form energy demand model to account for energy consumption activities that drive energy-related emissions. We contribute to the literature by exploring several spatial panel data models to account for spatial dependence between states. Estimation results and rigorous diagnostic analysis suggest that: (1) economic distance plays a role in intra- and inter-state CO2 emissions; and (2) there are statistically significant, positive economic spillovers and negative price spillovers to state-level emissions.