Energy Related CO2 Emissions before and after the Financial Crisis

Perry Sadorsky

doi:10.3390/su12093867

Abstract

The 2008–2009 financial crisis, often referred to as the Great Recession, presented one of the greatest challenges to economies since the Great Depression of the 1930s. Before the financial crisis, and in response to the Kyoto Protocol, many countries were making great strides in increasing energy efficiency, reducing carbon dioxide (CO2) emission intensity and reducing their emissions of CO2. During the financial crisis, CO2 emissions declined in response to a decrease in economic activity. The focus of this research is to study how energy related CO2 emissions and their driving factors after the financial crisis compare to the period before the financial crisis. The logarithmic mean Divisia index (LMDI) method is used to decompose changes in country level CO2 emissions into contributing factors representing carbon intensity, energy intensity, economic activity, and population. The analysis is conducted for a group of 19 major countries (G19) which form the core of the G20. For the G19, as a group, the increase in CO2 emissions post-financial crisis was less than the increase in CO2 emissions pre-financial crisis. China is the only BRICS (Brazil, Russia, India, China, South Africa) country to record changes in CO2 emissions, carbon intensity and energy intensity in the post-financial crisis period that were lower than their respective values in the pre-financial crisis period. Compared to the pre-financial crisis period, Germany, France, and Italy also recorded lower CO2 emissions, carbon intensity and energy intensity in the post-financial crisis period. Germany and Great Britain are the only two countries to record negative changes in CO2 emissions over both periods. Continued improvements in reducing CO2 emissions, carbon intensity and energy intensity are hard to come by, as only four out of nineteen countries were able to achieve this. Most countries are experiencing weak decoupling between CO2 emissions and GDP. Germany and France are the two countries that stand out as leaders among the G19.

Highlights

The 2008–2009 financial crisis, often referred to as the Great Recession, presented one of the greatest challenges to economies since the Great Depression of the 1930s
For the group of 19 major countries (G19), as a group, the increase in CO2 emissions post-financial crisis was less than the increase in CO2 emissions pre-financial crisis
For Australia, the biggest factor was an increase in energy intensity

Summary

Introduction

The 2008–2009 financial crisis, often referred to as the Great Recession, presented one of the greatest challenges to economies since the Great Depression of the 1930s. In response to the Kyoto Protocol, many countries were making great strides in increasing energy efficiency, reducing carbon dioxide (CO2) emission intensity and reducing their emissions of CO2. Under the Kyoto Protocol, carbon emissions trading was expanding, and the clean development mechanism offered emerging countries an attractive approach to pursue clean energy initiatives [3]. Some countries were pursuing aggressive energy policy to decarbonize their economies [4]. Consumer spending declined, and firms reduced production. Access to financial capital became difficult and investment in capital-intensive projects declined. The reduction in economic activity resulted in a reduction in energy usage and CO2 emissions fell

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