Ž .
Energy Economics 22 2000 383]394
Decomposition of industrial CO emissions:
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The case of European Union
K. Liaskas, G. Mavrotas, M. Mandaraka, D. Diakoulaki
U Department of Chemical Engineering, Laboratory of Industrial and Energy Economics, National
Technical Uni
¨
ersity of Athens, Athens, Greece
Abstract
This paper aims at identifying the factors that have influenced changes in the level of industrial CO emissions. By means of an algebraic decomposition method the observed
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changes are analyzed into four different factors: output level, energy intensity, fuel mix and structural change. The application study refers to the industrial sector of European Union
countries. The results show that CO emissions are possible to decrease without negatively
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affecting economic growth. In this sense, they confirm the decoupling of economic growth from energy consumption realized in the developed countries and prove that this detach-
ment holds true also for the atmospheric emissions associated with energy use. Q 2000 Elsevier Science B.V. All rights reserved.
JEL classification: Q40
Keywords: CO emissions; Decomposition; European Union
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1. Introduction
In recent years, decomposition analysis has been extensively used in an attempt to explain the mechanisms influencing energy consumption. The aim was to
disentangle distinct components behind historical energy consumption data in order to identify the factors that may have caused the observed changes. Further-
U
Corresponding author. 9, Heroon Polytechniou, Zografou Campus, Athens GR-157 80, Greece. Tel.: q30-1-772-32-57r772-32-00-1; fax: q30-1-772-31-55.
0140-9883r00r - see front matter Q 2000 Elsevier Science B.V. All rights reserved. Ž
. PII: S 0 1 4 0 - 9 8 8 3 9 9 0 0 0 3 5 - 3
K. Liaskas et al. r Energy Economics 22 2000 383]394 384
more, the obtained results assist in estimating future trends and in designing suitable policies to decouple economic growth from energy use. The most widely
applied decomposition techniques can be broadly classified into two categories: Ž .
a Techniques based on input]output analysis which are capable of identifying the impact on energy consumption of technological changes and structural shifts in
Ž the macro-economic context Park, 1982; Gowdy and Miller, 1987; Han and
. Lakshmanan, 1994 . Despite their simplifying assumptions, input]output based
techniques have a sound theoretical background and provide a thorough insight into the relationships between energy use and macroeconomic variables. Their
main drawback is that they do not allow for cross-national comparisons since input]output tables of different countries are hardly comparable to each other.
Ž . b Disaggregation techniques based either on simple algebraic methods such as
Ž .
Ž .
those proposed by Hankinson and Rhys 1983 , and by Park 1992 , or on indices, Ž
. such as the Divisia approach Boyd et al., 1988; Li et al., 1990 or the Laspeyres
Ž .
approach Howarth et al., 1991 . Although much less sophisticated than the input]output based techniques and failing to examine important macroeconomic
parameters, disaggregation methods achieved to identify the most crucial factors that may have influenced changes in energy consumption. Furthermore, due to
their simplicity, data collection and computational effort do not set any serious problems, while they enable comparisons across nations.
Disaggregation techniques have been primarily applied to the manufacturing sector due to its prominent contribution on both the economic development and
the final energy consumption of countries. In addition, industry is by nature more sensitive to energy prices and more open to technical change. In all relevant
studies the decomposition analysis has focused on three different factors affecting
Ž . Ž .
changes in energy consumption. These refer to: a total production output; b Ž .
structural changes referring to shifts across different industrial sectors; and c energy intensity, which is assumed to reflect both price changes and investments on
energy saving technologies. In addition, most of these methods are able to identify the combined effect of all three factors. In spite of the expected differences, which
are due to the different methodologies, time periods, countries and industrial branches examined, all studies converge to some common key findings. As illus-
Ž ..
trated in the cross-country comparison work of Park 1993 , developed countries have to a large extent achieved the decoupling of industrial production and energy
use, while improved energy intensity and shifts to less energy intensive sectors seem to be the main factors explaining changes in energy consumption. On the
contrary, with few exceptions, the traditional link between industrial production and energy consumption is still present in less developed economies.
In the 1990s, the growing environmental degradation observed at the local, national and global level has shifted the concern of energy analysts and policy
makers towards the environmental side-effects of energy use. It is namely recog- nized that reducing energy use is no more enough to ensure economic and social
welfare. Thus, the qualitative dimension of energy use becomes increasingly important. A source of major environmental concern is the global warming effect
K. Liaskas et al. r Energy Economics 22 2000 383]394 385
and the new question raised is how one can achieve the separation of greenhouse gases emissions from both economic growth and energy consumption.
As a response to the new policy needs, decomposition analysis has been ex- tended in order to identify the factors influencing changes in greenhouse gases
Ž .
emissions and in particular in carbon dioxide CO which is the major contributor
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to the greenhouse effect. In the literature there are mostly applications of input]output based techniques which have been modified by including the emis-
Ž sion factors associated to the different energy flows through the economy Casler
. Ž
. and Rose, 1998; Chang and Lin, 1998 . In addition, Greening et al. 1998 have
used the Divisia approach in a cross-national comparison of manufacturing CO
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emissions in 10 OECD countries. The purpose of this paper is to make such an extension to the algebraic
Ž .
disaggregation method proposed by Park 1992 and to proceed to a cross-national comparison of the factors that have influenced CO emissions generated in the
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Ž .
industrial sector of European Union EU countries. The analytical procedure followed is analytically described in Section 2. Data on CO emissions for the time
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periods 1973]1983 and 1983]1993 are given and the obtained results are presented and discussed. Some concluding remarks are included in Section 4.
2. Decomposition method
