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What Drives Energy Use? Prices, Efficiency Policies, and the Demand Frontier

Author

Listed:
  • David Benatia
  • R'emy Molini'e
  • Pierre-Olivier Pineau

Abstract

What drives cross-state differences in U.S. energy consumption? We combine LMDI decomposition, stochastic frontier analysis, and variable-importance methods on a panel of 50 states plus DC over the 2006--2022 period. The observed 12.8% decline in per capita energy use is driven almost entirely by intensity improvements. A variance decomposition attributes 63% of cross-state variation in log energy use to the demand frontier, 34\% to inefficiency above it, and 3% to noise. Within the frontier, energy prices account for roughly 26% of cross-state variation and state efficiency policies for about 13%, while GDP and climate together explain only around 10\%. Efficiency policies also operate through a second channel by reducing inefficiency, adding a further 6 percentage points to their total contribution. The results suggest that pricing and regulation are the primary drivers of cross-state energy use differences.

Suggested Citation

  • David Benatia & R'emy Molini'e & Pierre-Olivier Pineau, 2026. "What Drives Energy Use? Prices, Efficiency Policies, and the Demand Frontier," Papers 2604.12112, arXiv.org.
    • Handle: RePEc:arx:papers:2604.12112
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    References listed on IDEAS

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