The sources of growth of the Canadian business sector's CO 2 emissions, 1990–1996

Abstract

Findings of inverted-U relationships between economic growth and certain pollutants have generated considerable controversy yet, relatively little is known about the factors underlying these relationships. Canadian CO 2 emissions per unit of output have begun to decline, mirroring trajectories found using data across countries and time. This paper examines the pattern of CO 2 emissions per unit of output between 1990 and 1996, decomposing the changes into an energy intensity effect, an energy mix effect and a carbon content effect. Our contribution constitutes a case study of the relative importance of these factors for a country on the downward-sloping portion of its CO 2 emission-output trajectories. Overall, our results indicate that the combination of the energy intensity and the substitution effect contributed to the decline in CO 2 emissions per unit of output. While the substitution effect was emissions reducing, it was not by itself sufficient to generate a major downward-sloping emission-output trajectory.