Original scientific paper
https://doi.org/10.1080/1331677X.2023.2164866
The intertemporal substitution effect of energy consumption under climate policy changes
Yingying Xu
Bolun Fan
Zhixin Liu
Yueqiang Zhao
Adelina Dumitrescu Peculea
Abstract
Based on the intertemporal substitution effect, the high inflation
expectations can stimulate agents to consume now rather than in
the future. However, under the background of global climate policy
changes, how inflation expectations affect energy consumption?
Using the bootstrap Granger full-sample causality test and
sub-sample rolling window tests, this study examines the intertemporal
substitution effect of energy consumption in the U.S.
The results based on the full-sample data indicate no causality
between inflation expectations and energy consumption, which
suggests that the intertemporal substitution effect of energy consumption
does not exist. Nevertheless, the rolling window
method which estimates a time-varying causality identifies a
short-lived positive effects of inflation expectations on energy
consumption in a distinct sub-period before the global Paris
agreement, but disappears since then. Therefore, the intertemporal
substitution effect regarding energy consumption does not
exist under the background of pressing carbon targets. The
effects of energy consumption on inflation expectations can be
positive or negative, which tells a cautionary tale about climate
policies aiming at engineering lower carbon emissions.
Keywords
energy consumption; inflation expectation; intertemporal substitution effect; climate policy
Hrčak ID:
314037
URI
Publication date:
17.5.2023.
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