Functional data analysis of the relationship between electricity consumption and climate change drivers

Climate change has become increasingly important in recent years. It is the outcome of the burning of fossil fuels that increased the concentration of atmospheric carbon dioxide (CO2), over the last century. Mitigating the impacts of climate change requires a better understanding and assessment of the countries' economic decisions on the amount of CO2 emissions. This paper assesses the variability between the different countries in the trends of CO2 emissions and electricity consumption from 1975 to 2014, while identifying clusters of countries of similar trends over time. The novel methodology applied in this paper enables us to assess long-debated issues in climate literature. The temporal dynamic effects of electricity consumption and economic growth on CO2 emissions across countries are studied using functional data analysis (FDA) methods. The latter have proven to be useful tools for visualising similarities and differences in the non-linear trends of CO2 emissions without forcing linear trends and stationary relationships which can be unrealistic and misleading. The results indicate the possibility of identifying changes in the trends of CO2 emissions and electricity consumption for a wide range of heterogeneous countries over the study period. The findings also reveal that economic growth puts a strain on the environment, where many high-income countries are still away from attaining economic-energy sustainability.