Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

The purpose of this paper is to identify the main features ofsectoral energy consumption in Korea, by decomposing eachsectoral energy consumption into common and idiosyncraticvariations. This paper also attempts to find the main driving forcesof the common variations of energy consumption which areextracted from each sectoral energy consumption. The dynamiclatent common factor model is estimated by the Bayesian MCMCmethod and used to find contributions of various driving forces. Themain findings of this paper are summarized as follows. First, exceptfor industrial electricity consumption, most sectoral energyconsumption is mainly driven by sector-specific or idiosyncraticcomponents, rather than macroeconomic variables. In particular,this pattern is strongly found in energy consumption of thecommercial sector. Secondly, it turns out that the main drivingforce of the common variations of energy consumption in Korea isthe economic growth rate. It approximately accounts for 76~80% oftotal variations of the common variations. However, it is also foundthat the effects of other various factors, such as the populationgrowth rate, energy intensity, the fraction of energy-intensiveindustries, CDD(Cooling Degree Days) and HDD(Heating DegreeDays), have steadily increased in explaining the common variationsof energy consumption in Korea.