Decomposing industrial CO2 emissions of Southern European countries into production- and consumption-based driving factors

Abstract

Industry is a leading economic sector in European countries as well as a major carbon emitter. European industry has been quite successful in abating the environmental pressures and carbon emissions and increasing its energy efficiency from production over the last years. However, focusing only on the production-side may not lead to the desired sustainable development since there are other forces, such as the international trade and consumption patterns, which also shape the evolution of industrial CO2 emissions. The aim of this study is to investigate how changes in production and consumption of industrial products affect the CO2 emissions of industries in four Southern European countries, during the period 2000–2011. To this purpose, a new model of Index Decomposition Analysis is developed in order to decompose the change in CO2 emissions of the industrial sectors of Greece, Italy, Spain and Portugal. Moreover, the examined period in this study is split into two sub-periods, 2000–2008 and 2008–2011, in order to investigate the impact of the recent economic crisis on both the driving factors and industrial CO2 emissions. The overall evolution of industrial CO2 emissions was quite similar in all the countries and the decomposition results of the two sub-periods revealed substantial homogeneity across countries. Two production-based driving factors, the economic activity and the energy intensity, were the main driving factors which shaped the total change in CO2 emissions of industries in the examined countries. The consumption-based driving factors contributed mostly to the increase in industrial CO2 emissions but not at the same level as the production-based ones. Furthermore, industrial production was more significantly affected by the economic crisis than consumers’ expenditures. The decomposition results performed at a sectoral level revealed that it was difficult for Southern European consumers to switch to a more environmentally conscious use of industrial products and their consumption preferences were not significantly affected by the consequences of the economic crisis.