Multiple calibration decomposition analysis: Energy use and carbon dioxide emissions in the Japanese economy, 1970–1995

Abstract

The purpose of this paper is to present a new approach to evaluating structural change of the economy in a multisector general equilibrium framework. The multiple calibration technique is applied to an ex post decomposition analysis of structural change between periods, enabling the distinction between price substitution and technological change to be made for each sector. This approach has the advantage of sounder microtheoretical underpinnings when compared with conventional decomposition methods. The proposed technique is empirically applied to changes in energy use and carbon dioxide (CO 2) emissions in the Japanese economy from 1970 to 1995. The results show that technological change is of great importance for curtailing energy use and CO 2 emissions in Japan. Total CO 2 emissions increased during this period primarily because of economic growth, which is represented by final demand effects. On the other hand, the effects such as technological change for labor or energy mitigated the increase in CO 2 emissions.