Decomposition Analysis of CO2 Emission from Electricity Generation: Comparison of OECD Countries before and after the Financial Crisis

Abstract

The purpose of this study is to analyze the factors that affect CO2 emissions in the electricity generation sector in 36 OECD countries during the periods 1995–2008 and 2008–2017. This paper utilized Logarithmic Mean Divisia Index method for decomposing CO2 emission into economic activity, electricity intensity that represents demand policy effort, the share of thermal generation, the mix of thermal generation, thermal efficiency that represent supply policy efforts, and carbon emission coefficient. The results showed that EU nations achieved a higher level of CO2 reduction compared to that of non-EU nations. Regarding the policy factors, the decrease in the share of thermal generation served as the key driver, followed by the decrease in electricity intensity via improvements in energy consumption efficiency. Most non-EU countries such as South Korea, Chile, Mexico, Turkey, and Japan demonstrated an increasing trend of carbon emission during this period, which could be attributed to the changes in the generation mix on the supply side or the electricity intensity on the demand side. Increase in electricity price was confirmed to cause lower electricity intensity. South Korea had the largest amount of carbon emission among OECD countries and maintained one of the lowest electricity retail prices among OECD countries.