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

David Benatia, R\'emy Molini\'e and Pierre-Olivier Pineau

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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.

Date: 2026-04
New Economics Papers: this item is included in nep-eff and nep-ene
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