Common trends and drivers of CO2 emissions and employment: a decomposition analysis in the industrial sector of selected European Union countries

Abstract

The countries of the European Union face the challenge of reversing the declining role of industry and achieving their targets for sustainable development, combining industrial growth with fewer environmental repercussions and more jobs. This paper uses a decomposition analysis in order to quantify the effect of the driving factors on two indicators of sustainable industrial development, CO2 emissions and employment, in five European Union countries during 2000–2011. The decomposition method applied is the Log Mean Divisia Index I, and the models developed comprise some common or closely related driving factors. The parallel investigation of the factors affecting the two indicators offers useful insights into relevant complementary and/or antithetical effects. The timeframe of the study is divided into two time periods, before and after the start of the economic crisis, 2000–2007 and 2007–2011, respectively. This time division enables the evaluation of the impacts of the economic crisis directly on the drivers, and indirectly on the two indicators. It was deduced that, in both time periods, the two main drivers of industrial CO2 emissions and employment were economic growth and resource intensity, which counterbalance each other. Structural changes appeared to have a rather marginal effect, even if the general tendency was the expansion of less energy-/labour-intensive sectors. Finally, changes in the fuel mix used in industry were beneficial to emissions reduction in all the examined countries, especially in the second time period. The results obtained show that the examined EU countries have not found a solid path towards sustainable and inclusive industrial development yet. The stronger economies seem to move faster to this direction, though.