The impact of biomass consumption on CO2 emissions: Cointegration analyses with regime shifts

The source of carbon dioxide (CO2) emissions has been of great interest to researcher(s) and/or policy maker(s) within ongoing efforts to diminish the emissions in the world due to CO2's serious adverse environmental effect. This paper investigates the possible existence of long run relationship between CO2 emissions and biomass consumption in US for the period January 1990-September 2011. To this end, paper first seeks for effect of biomass on CO2 through energy literature and later follows cointegration analyses with structural breaks to reveal parameter estimates of long run equilibrium of CO2 with fossil fuel consumption and biomass consumption. Eventually this paper explores that structural breaks are important to understand the course of CO2 and that, as expected, fossil fuel and biomass effect CO2 positively and negatively, respectively. Alternative cointegration analyses with regime shifts confirm negative impact of biomass and positive impact of fossil fuel on CO2, as well. (c) 2012 Elsevier Ltd. All rights reserved.