This paper investigates the volatility change of Korean energy consumption
applying endogenous structural break analysis methods. Empirical results show
that the energy consumption volatility in Korea has reduced by 50% after
January, 2002. In the aspects of sector and energy source, the volatility of
transportation, commerce‧household, public energy consumption and
petroleum has decreased. On the other hand, the volatility of coal and
renewable energy has increased. The analysis indicates that industry,
commerce‧household, petroleum and heat energy consumption are the main
sources of the volatility reduction. The weakened relationship between industry
production and energy consumption is also found to reduce the volatility.
Another important reason for the volatility reduction is the decrease of
adjustment speed among energy consumption, industry production and energy
price caused by the reduced size of disequilibrium error. These empirical
results imply that improvement of energy efficiency and structural transition
from energy intensive industry to energy efficient industry should be
accelerated in order to maintain the stability of Korean energy consumption.