The Decomposition Analysis of Carbon Emissions: Theoretical Basis, Methods and Their Evaluations

Abstract

As an analytical framework for studying the characteristics of changes in things and their action mechanisms, the decomposition analysis of greenhouse gas emissions has been increasingly used in environmental economics research. The author introduces several decomposition methods commonly used at present and compares them. The index decomposition analysis (IDA) of carbon emissions usually uses energy identities to express carbon emissions as the product of several factor indexes, and decomposes them according to different weight-determining methods to clarify the incremental share of each index, in which way it is possible to decompose the models that contain less factors, process time series data, and conduct cross-country comparisons. It mainly includes the Laspeyres index decomposition and the Divisia index decomposition. Among them, the LMDI I method has been widely used for its advantages such as generating no residuals and easy to use. The structural decomposition analysis (SDA) can be used to conduct a more systematic analysis, decompose models with more influencing factors, and analyze the impacts of various factors on emissions, but this method has higher requirements for data collection. The biggest difference between the SDA method and the IDA methods of carbon emissions is that the former is based on an input–output system, while the latter only needs to use sectors’ aggregate data.