Predicting the future climate impact of energy consumption by consumer confidence

Ex-post or reactive energy policy methodology has demonstrated limited efficacy in halting the acceleration of climate change. This study posits that proactive or ex-ante energy policy adaptation can improve the efficacy of energy policy by enabling the formulation of preemptive measures, which require a predicted future climate impact of energy consumption. The study makes this prediction by estimating the linear and nonlinear indirect effects of consumer confidence on carbon emissions through the mediation of industrial output and consumption of nonrenewable and renewable energy. For this purpose, the study employs recently-introduced time-varying and dynamic network analysis and takes the three highest carbon-emitting countries. The study reaches three conclusions. First, a linear change and a positive shock to consumer confidence in the United States are predicted to increase carbon emissions, whereas a negative shock to consumer confidence is predicted to reduce carbon emissions. Second, a linear change and a positive shock to consumer confidence in Germany are predicted to reduce carbon emissions, whereas a negative shock to consumer confidence is predicted to increase carbon emissions. Third, a linear change and a positive shock to consumer confidence are predicted to increase and decrease carbon emissions through the mediation of nonrenewable and renewable energy, respectively, in China. A negative shock to consumer confidence is predicted to increase carbon emissions in the country. Given these predictions, the study makes proactive and country-specific policy recommendations to increase the efficacy of energy policy at national and international levels.