Impact of Key Drivers on Energy Intensity and GHG Emissions in Manufacturing in the Baltic States

Abstract

The improvement in energy efficiency (EE) and increasing consumption of renewable energy sources (RES) in manufacturing play an important role in pursuing sustainable development in the Baltic States and contribute to the transition to a low-carbon economy. This paper presents the results of a detailed analysis of the channel through which EE, along with structural activity changes, passes energy intensity and total energy savings and in combination with other key drivers results in reductions in greenhouse gas (GHG) emissions in manufacturing in Estonia, Latvia, and Lithuania during the period 2010–2020, taking into account the role of transformations in the energy and climate framework of the European Union (EU). The Fisher Ideal Index, the Kaya identity, the Logarithmic Mean Divisia Index (LMDI), and comparative analysis methods are used. The results of the impact analysis of key drivers on energy intensity showed different contributions towards improvements in EE and structural activity changes to changes in energy intensity in manufacturing, which decreased by 53.1% in Estonia, by 30.5% in Lithuania, and by 16.5% in Latvia. The dominant role of EE improvements on total energy savings is identified. The results of the GHG decomposition analysis showed that because of improvements in energy intensity, reductions in the share of fossil fuels, and increases in labour productivity, number of employees, and emissions intensity, the GHG emissions decreased by 35.5% in Estonia, 40.4% in Latvia, and 8.1% in Lithuania. The results confirm the need for new policies and the implementation of relevant commitments to save energy and increase the contribution of RES in all three countries.