The Drivers of Greenhouse Gas Emissions Intensity Improvements in Major Economies: Analysis of Trends 1995–2009

Abstract

This article analyses the trends in greenhouse gas (GHG) emissions intensity over the period 1995–2009 in a mix of developing and developed economies that account for almost two-thirds of global emissions. From the accounting point of view, it distinguishes between the production-based emissions (PBEs) and consumption or demand-based emissions (DBEs). Several studies find that while PBEs in many developed economies during the last decades have stabilised, the DBEs are on the rise. Understanding the relative influence of various factors that have shaped the different patterns of emissions growth can provide us with important policy insights for controlling GHG emissions. The article undertakes a decomposition exercise to understand the variations/fluctuations in both PBEs and DBEs intensities due to changes in technology and changes in economic structure (i.e., composition of aggregate production and final consumption). The main findings of this article are that, over the period 1995–2009, technological change has been the key driver of emissions intensity improvements in both PBEs and DBEs. Emissions intensity improvements in consumption activities have been slower than production, particularly in EU 27. Structural changes or changes in the composition of aggregate production and demand have relatively smaller contribution in overall intensity improvement. Structural shifts in the economy have somewhat negatively contributed to emissions intensity improvements in Canada and China. In India, structural shifts in both production and consumption activities have contributed significantly to emissions intensity improvements. When taking account of trade, changes in the sources of imports have worked against overall emissions intensity improvements, particularly in the developed economies of Canada, European Union (EU 27) and USA, where imports from relatively emissions intensive sources have increased during the period. JEL: D58, Q56, O13