Working Papers in Economics,
University of Gothenburg, Department of Economics

Abstract: This study undertakes a decomposition analysis to identify the drivers of carbon emissions change in the Swedish business and industry sectors 1993 - 2006. On aggregate, energy intensity decreased, but this does not seem to have been very important for reducing emissions. Rather, fuel substitution seems to have been more important, which is in line with findings from the decomposition literature on Sweden. However, at the sectoral level, we find no clear pattern of the effect of fuel substitution and energy intensity on emissions. We also draw some methodological conclusions: decomposition analysis should be undertaken at the most disaggregate level possible; assessing decomposition results by summing results over several time periods leads to biased results; and decomposition analysis should not be based only on some initial and final years of a long time period. Furthermore, we address the problem of double counting energy flows in decomposition analysis of aggregate effects when the energy sector is included, and point out potential problems related to output measured in monetary terms.

Keywords: carbon dioxide emissions; decomposition; energy intensity; fuel substitution; sectoral change

JEL-codes: C02; Q40; Q54

43 pages, First version: June 24, 2008. Revised: January 1, 2010.

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