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.