Causal relationships of energy consumption, price, and CO2 emissions in the U.S. building sector

The U.S. building sector was the most significant emission contributor (over 40%). This paper attempts to examine and use the causal relationships between energy resource consumption, energy prices, and carbon dioxide emissions (from 1973 to 2012) to determine the effects of energy sources and prices on carbon emissions. The relationships would potentially allow policymakers better understand the use of different energy sources, and prices to manipulate carbon emissions in the building sector. Using the Granger causality test and generalized impulse response functions, several causal relationships have been verified. The results indicate that there were long-run causalities from natural gas prices to natural gas consumption in both the residential and commercial sectors, as well as from electricity prices to electricity consumption in the commercial sector. Moreover, electricity and coal consumption were found to cause carbon dioxide emissions in the residential and commercial sectors, respectively. The short-run causality test found that natural gas consumption is the most sensitive toward changes in natural gas price in the residential sector, and electricity consumption is the most sensitive toward electricity prices in the commercial sector. This research also found that the commercial sector's energy consumption generated greater influence on carbon emissions than the residential sector.