Structural decomposition analysis and input-output subsystems: Changes in CO2 emissions of Spanish service sectors (2000-2005)

The analysis of gas emissions by an input-output subsystem approach provides detailed insight into pollution generation in an economy. Structural decomposition analysis, on the other hand, identifies the factors behind the changes in key variables over time. Extending the input-output subsystem model to account for the changes in these variables reveals the channels by which environmental burdens are caused and transmitted throughout the production system. In this paper we propose a decomposition of the changes in the components of CO₂ emissions captured by an input-output subsystems representation. The empirical application is for the Spanish service sector, and the economic and environmental data are for years 2000 and 2005. Our results show that services increased their CO₂ emissions mainly because of a rise in the emissions generated by non-services to cover the final demand for services. The decomposed effects show a decrease in CO₂ emissions due to technological changes between 2000 and 2005 compensated by an increase in emissions caused by the rise in final demand of services. Finally, large asymmetries exist not only in the quantitative changes in the CO₂ emissions of the various services but also in the decomposed effects of these changes.     

The control of CO2 emissions and its economic impact: An AGE model for a german state

Since it is believed that CO₂ is responsible for 55% of the greenhouse effect, a CO₂ levy is now under consideration in several countries. For an assessment of the macroeconomic implications of an integrated energy and environmental policy we employ an applied general equilibrium model (AGE) since all sectors of an economy and all private households contribute to CO₂ emission. Our model is a temporary equilibrium model with capacity extension under adjustment costs and with abatement activities for SO₂ and NO_x emissions.The model of consumer behavior will result in a system of consumer demand functions for non-durables as well as for durable goods. The simulations show the cost of inefficiency in resource allocation if CO₂ taxes differ between industries and households. We finally present the marginal cost curve of CO₂ emission reduction.     

On the Limits of the Post-Industrial Society Structural Change and Service Sector Employment in Spain

The purpose of this paper is to examine the growth and the structure of employment in the service sector in the Spanish Economy from 1958 to 1989 and to draw comparisons with the trends exhibited by other European countries. In contrast to the explanation offered by the theory of stages, which assumes that growth in services is associated with the pattern of final demand, this research argues that, since the middle of the 1970s, the growth of market service employment is due to an increase in intermediate demand of services. In order to demonstrate this, an intersectoral analysis is applied to input output data which was homogenised for this research. This methodological approach enables employment in the service sector to be connected to the other sectors. Rejecting the idea that services are replacing manufacturing as the new engine of growth, the results show an increased dependence on market services by industrial production. The final part of the paper presents explanations for this trend.     

Transition of the Chinese Economy in the Face of Deep Greenhouse Gas Emissions Cuts in the Future

China joined the Paris Agreement, and the global 2°C and 1.5°C warming targets will be supported by China. In order to achieve these targets, China's CO₂ emissions need to be cut deeply by 2050. The present paper presents studies from the integrated policy assessment model for China (IPAC) team about the impact on China's economic development of deep cuts in greenhouse gas (GHG) emissions, in order to realize the Paris climate change targets. With the requirement of deep cuts in GHG emissions in China, China's economic development will also be impacted in moving toward a low‐carbon or zero‐carbon emission‐based economy by 2050. This means the Chinese economy needs a strong transition over the next three decades, a relatively short time. All sectors in the economy need to seek ways to reduce GHG emissions, and this could change activities, industry processes and technologies in order to make the deep cuts in GHG emissions happen. This is the meaning of the economic transition toward to a low‐carbon economy. The findings of the present paper include: a significant transition in the energy supply sector; a high rate of electrification in all end‐use sectors; and a technology transition in the transport sector. Transitions will also occur in the traditional industrial sectors, including steel making, cement manufacture, and the chemical sector. The availability of low‐cost renewable energy could change the allocation of industries, which could potentially have a strong impact on regional economic development. Deep cuts in CO₂ emissions in China need not be a burden for economic development, as the IPAC results show there will be a more than 1.5% increase of gross domestic product by 2050 in the deep cut scenario compared with the baseline scenario.     

Norwegian Emissions of CO2 1987–1994 A Study of Some Effects of the CO2 Tax

Several countries have introduced taxes on fossil fuels with the aim of reducing atmospheric emissions, partly because of local environmental goals (SO₂, NO_x) and partly to participate in a global effort to reduce emissions of greenhouse gases. Many macroeconomic studies, based on both global and national models, have been made of how emissions can be reduced with the help of taxes and the consequent reduction in GDP following the introduction of such taxes. Norway has had a CO₂ tax for five years, thereby providing a unique opportunity to evaluate the effects of this tax on emissions. The paper provides a counterfactual analysis of energy consumption and emissions if no CO₂ taxes had been introduced, compared with the actual situation in which such taxes exist. The effect of a CO₂ tax on oil consumption, and thus CO₂ emissions is studied on the basis of partial economic models for various sectors of the Norwegian economy. The study indicates that the CO₂ tax has had an impact on CO₂ emissions in Norway.     

Economic Impacts of Reducing NOx Emissions in Norway

Using a multisector computable general equilibrium model for the Norwegian economy, the impacts on main macroeconomic indicators of reducing NO_x emissions are analyzed. Seven specific technical measures regarding passenger cars, trucks, ships and industrial processes are studied. The measures have somewhat different impacts on the macroeconomy. Especially the measure pertaining to light and heavy duty trucks leads to an increase in GDP, because of higher income from indirect taxes. However, the sum of value added in the production sectors is reduced. The other measures cause a decrease in GDP. All in all, we find that the costs, in terms of reductions in GDP and private consumption, incurred from the introduction of additional NO_x emissions control measures are quite small.     

The rise of service employment and its impact on aggregate productivity growth

This paper investigates how the employment shift from manufacturing toward service sectors affects the rate of economic growth when services play their role both in intermediate and in final demand. Our model includes as a special case both Baumol’s [Baumol, W.J., 1967. Macroeconomics of unbalanced growth: the anatomy of urban crisis. American Economic Review 57 (3), 415–426] model, in which services are produced only for final consumption, and Oulton’s [Oulton, N., 2001. Must the growth rate decline? Baumol’s unbalanced growth revisited. Oxford Economic Papers 53 (4), 605–627] model, in which services are entirely devoted to intermediate demand. We show that, given that the growth rate of productivity in the service sector is lower than that in the manufacturing sector, both the employment share in manufacturing and the rate of economic growth will decline in the long run irrespective of the size of the elasticity of substitution between labor and service input.     

The economic effects of health care systems on national economies: an input-output analysis of Slovenia

This paper estimates the size of the economic impact generated by the Slovenian health care sector on the national economy in the 2009–2014 period. The study separately calculates output, income, employment, value-added and import multipliers for the Slovenian health care sector based on input-output analysis covering 49 sectors. Initially, values of simple output multipliers for all years are estimated. When the re-circulation of final demand through households is added to the direct and indirect economic effects, the values of total output multipliers considerably exceeds 2. The results suggest that an additional million EUR of final demand in the health care sector will, based on different scenarios, increase the total employment by 20 to 30 units. Moreover, the type II employment multipliers imply that under the best-case scenario one employee in the health care sector creates an additional 0.7 unit of employment in remaining structures of the observed economy. Stability evaluation of the derived multipliers suggests that the domestic health care sector may reduce volatilities in production, income and employment and consequently act as an important shock absorber in the economy.     

A Structure Decomposition Analysis of China’s Production-Source CO<Subscript>2</Subscript> Emission: 1992–2002

This paper provides an empirical analysis of the relative impacts of various factors on CO₂ emissions from production of goods and services in China during two consecutive periods of 1992–1997 and 1997–2002. Results show that, on the positive side, level of final demand for goods and services was the main reason for the increase of production-source CO₂ emission, while structure of net export has similar positive effect during the first period of 1992–1997. On the negative side, technology factors remains as the main factors reducing emissions. The level of net export played some role in the first period, but the effects were seen in the second period from energy intensity, fuel mix and input mix. The results suggest that economic structure be focused as an important factor for CO₂ emission reduction, with construction and transport as two key industries to lower carbon emission.     

Economic Takeoffs in a Dynamic Process of Globalization*

The paper develops a dynamic general‐equilibrium framework to illustrate that trade liberalization may speed up the process of globalization and industrialization by enabling a small open economy to reallocate production factors to modern export sectors where increasing returns to experience are present. The authors emphasize the role of knowledge in service activities related to the export of modern sector goods, which has the form of a public good that can be utilized in exporting of other modern sector goods. As a consequence of this knowledge accumulation, the economy begins to take off and exhibits more rapid rates of wage and output growth. The accumulation of knowledge also shifts comparative advantage in the modern sector to more service‐intensive goods, thus leading to a natural evolution of comparative advantage. These results lend theoretical support to the different development experiences in the 1960s between East Asia and Latin America.     

The carbon footprint of UK households 1990-2004: A socio-economically disaggregated, quasi-multi-regional input-output model

This paper presents a socio-economically disaggregated framework for attributing CO₂ emissions to people's high level functional needs. Based around a quasi-multi-regional input-output (QMRIO) model, the study, in theory, takes into account all CO₂ emissions that arise from energy used in production of goods and services to satisfy UK household demand, whether the emissions occur in the UK or abroad. Results show that CO₂ emissions attributable to households were 15% above 1990 levels in 2004, and that although absolute decoupling occurred between household expenditure and CO₂ during the UK's switch from coal to gas in the early 1990s, since then only slight relative decoupling is evident. The proportion of CO₂ that arises outside UK borders in support of UK consumption is rising, and reducing these emissions is particularly problematic in a global trading system. Investigation into the carbon footprint of different segments of the UK population shows wide variation: the segment with the highest carbon footprint emits 64% more CO₂ than the segment with the lowest. Results show that recreation and leisure are responsible for over one quarter of CO₂ emissions in a typical UK household in 2004. We conclude that expanding lifestyle aspirations are significant factors in driving household CO₂ emissions, but the study also emphasizes that attention must be paid to the infrastructures and institutions that result in considerable amounts of CO₂ being locked up in basic household activities through which people meet their everyday needs for subsistence, protection, and communication with family and friends. The findings highlight the sheer scale of the challenge facing UK policy-makers, and suggest that policies should be targeted towards segments of society responsible for the highest carbon footprints.     

Growth of business services: A supply‐side hypothesis

This paper aims to explain why and how the service sector may grow faster than manufacturing. It develops a two‐sector, closed‐economy model, having a manufacturing sector and a service sector. Accumulation of human capital serves as the basis of growth. The analysis focuses on business services, while household services are also considered. It is argued that differences in returns to scale between the two sectors and employment frictions in manufacturing explain why the growth rate of the service sector may be higher. The model also features that within the service sector the business services sub‐sector may grow faster than household services.     

Innovation in the Service Sector Results from the Italian Statistical Survey

This acticle provides fresh empirical evidence on the relevance and nature of innovation activities in the service sector. The evidence can be summarized as follows: Technological innovation is quite a diffused phenomenon in market services: more than one-third of surveyed firms have introduced technological innovations during the period 1993–95. The amount of financial resources devoted to innovation varies widely across service sectors. Financial, computing and software, engineering, and telecommunication services are the most innovative service sectors. Most service firms can distinguish between innovations in services and in processes. Process innovation emerges as the most diffused typology. Service firms rely on a wide range of innovation sources. The acquisition and development of software and investment in machinery are the most cited. Investment, R&D, and software are the major components of firms’ innovation expenditure. Major obstacles for introducing technological innovation are of an economic nature, that is, cost and risk too high. The two most important objectives of firms’ innovation strategies consist of improving service quality and reducing cost. Technological information is drawn mainly from in-house production departments as well as from outside suppliers of equipment, materials, and components. Public and private research institutions as well as patents and licenses play a very marginal role. Finally, in the near future the importance of technology for firms’ performance is expected to increase in service industries.     

Supply and demand factors in the output decline in East and Central Europe

What are the relative weights of supply and demand factors in generating the output declines observed in Poland during its transition to the market? And how important are the factors that fit under the rubric of “supply and demand” in comparison to other potential reasons for the output decline, especially adjustment away from the Soviet-style economic system? The initial decline seems to have been due to a combination of aggregate demand shocks associated with the stabilization, declines in inventory investment due to the transition from a shortage economy, and especially shifts in demand away from socialized sector industry towards other sectors of the economy. Growth has come primarily from expansion in new sectors, such as services and residential construction, and in new enterprises. The applicability of one-good macroeconomics is limited in understanding either the output decline or the subsequent growth in Poland.     

The opportunity cost of land use and the global potential for greenhouse gas mitigation in agriculture and forestry

This paper analyses the role of global land management alternatives in determining potential greenhouse gas mitigation by land-based activities in agriculture and forestry. Land-based activities are responsible for over a third of global greenhouse gas emissions, yet the economics of land-use decisions have not been explicitly modeled in global mitigation studies. In this paper, we develop a new, general equilibrium framework which effectively captures the opportunity costs of land-use decisions in agriculture and forestry, thereby allowing us to analyse competition for heterogeneous land types across and within sectors, as well as input substitution between land and other factors of production. When land-using sectors are confronted with a tax on greenhouse gas emissions, we find significant changes in the global pattern of comparative advantage across sectors, regions, and land types. Globally, we find that forest carbon sequestration is the dominant strategy for GHG emissions mitigation, while agricultural-related mitigation comes predominantly from reduced methane emissions in the ruminant livestock sector, followed by fertilizer and methane emissions from paddy rice. Regionally, agricultural mitigation is a larger share of total land-use emissions abatement in the USA and China, compared to the rest of the world, and, within agriculture, disproportionately from reductions in fertilizer-related emissions. The results also show how analyses that only consider regional mitigation, may bias mitigation potential by ignoring global market interactions. For example, USA-specific analyses likely over-estimate the potential for abatement in agriculture. Finally, we note that this general equilibrium framework provides the research community with a practical methodology for explicit modeling of global land competition and land-based mitigation in comprehensive assessments of greenhouse gas mitigation options.     

Decomposing the decoupling of CO2 emissions and economic growth in Brazil

This paper examines the occurrence of a decoupling between the growth rates in economic activity and CO₂ emissions from energy consumption in Brazil from 2004 to 2009. This decoupling was highlighted when economic activity and CO₂ emissions moved in opposite directions in 2009. More generally, we observe several periods of relative decoupling in Brazil, but not to the extent witnessed in 2009. To identify the determinants of emissions change, we develop a decomposition model based on a log-mean Divisia index (LMDI) framework. The results indicate that the carbon intensity and energy mix are the main determinant of emissions reduction in Brazil between 2004 and 2009. Modifications in the economy structure are also associated to emission mitigation in the period. Such evidence demonstrates similarities with events of decoupling registered for the interval 1980-1994 in Brazil. Finds from Brazil differ from observations in other countries in which improvement in energy intensity has been the most common determinant of emissions reduction.     

Climate policy and the optimal extraction of high‐ and low‐carbon fossil fuels

Abstract. We study how restricting CO₂ emissions affects resource prices and depletion over time. We use a Hotelling‐style model with two non‐renewable fossil fuels that differ in their carbon content (e.g., coal and natural gas) and in addition are imperfect substitutes in final good production. We show that an economy facing a CO₂ flow‐constraint may substitute towards the relatively dirty input. As the economy tries to maximize output per unit of emissions it is not only carbon content that matters: productivity matters as well. With an announced constraint the economy first substitutes towards the less productive input such that more of the productive input is available when constrained. Preliminary empirical results suggest that it is cost‐effective to substitute away from dirty coal to cleaner oil or gas, but to substitute from natural gas towards the dirtier input oil.     

The effect of ESCOs on carbon dioxide emissions

Proponents of energy service companies (ESCOs) argue that these firms provide a crucial instrument for delivering improved energy efficiency in public and private sectors, thus contributing to carbon dioxide (CO₂) emission reduction around the world. Do ESCOs reduce CO₂ emissions? To answer this question, we develop an estimating equation, which approximates the IPAT model, from a simple model of production. We estimate a dynamic panel of 129 countries over the period 1980–2007 to show that the ESCOs effectively reduce CO₂ emissions and that this effect increases over time. These findings also prove robust to the inclusion of a set of control variables, different dates of the first ESCO and the Kyoto Protocol. Finally, we discuss energy policy implications.     

Impacts of an EC carbon/energy tax and deregulating thermal power supply on CO2, SO2 and NOx emissions

Emission of CO₂, SO₂ and NO_x are all closely linked to the burning of fossil fuels. Here we report on simulations done by linking a Sectoral European Energy Model (SEEM), covering energy demand in nine Western European countries, with the emission-transport-deposition model RAINS developed by IIASA. The study analyses emissions of CO₂, SO₂ and NO_x, deposition of sulphur and nitrogen and the extent of areas where the critical load for sulphur is exceeded in year 2000 under four different energy scenarios. Two different sets of future behavioural patterns for the thermal electric power production sector are considered. In one regime, called the plan-efficient regime, the sector is assumed to follow official plans with regard to investment in new capacity. In the other regime, called the cost-efficient regime, the thermal power sector is assumed to behave in a cost minimizing manner. The effects of the proposed EC carbon/energy tax are studied under both regimes, giving rise to altogether four scenarios.In both regimes the effect of the EC tax is to reduce emissions by between 6 and 10 per cent in year 2000 relative to the scenarios without the tax. A change of regime, from the regulated, plan-efficient regime to the market-based, cost-efficient regime, will, by itself, reduce emissions of CO₂ and NO_x by approximately 3 per cent, while SO₂ emissions are reduced by 13 per cent. The EC tax will reduce sulphur deposition by more than 5 per cent in the nine model countries under the plan-efficient regime. A change of regime further reduces the total deposition by 9 per cent. The area where depositions exceed the critical load is reduced by approximately 6 per cent in year 2000 by the tax in both regimes. Changing from the plan-efficient to the cost-efficient regime has a similar impact.Although the emission reductions due to the EC tax may seem modest, they are shown to have a sizeable effect on the technological abatement costs of reaching targets like those prescribed in the Sofia protocol on the stabilisation of NO_x emissions, and the Helsinki protocol on SO₂ emission reductions. This is part of what can be considered to be secondary benefits of the EC carbon/energy tax.     

Adoption of digital repositories for CO2 emissions reduction: the case of Korea

This study aims to estimate the potential economic benefits, energy and CO₂ emissions reductions when using trusted third-party digital repository (TTPR) services in one individual bank, and within the banking industry in Korea. First, the cost, benefit and net benefit of using TTPR services in the banking industry are estimated. Second, the net induced output effect is estimated. Third, based on an environmentally extended input–output analysis, CO₂ emissions reduction was estimated as 1924.32 tons in 2009 and the energy consumption reduction as 640.70 TOE. Fourth, the total economic benefit, which is the sum of the net induced output effect and economic value of CO₂ emissions reductions, is approximately $11.04 million. The findings demonstrate that energy consumption and CO₂ emissions reductions are meaningful enough to result in significant economic benefits. Therefore, the Korean government should promote the use of TTPR services in the entire industry.