Growth and CO2 emissions: how do different countries fare?

2 Nov 2007

The recent International Panel on Climate Change Fourth Assessment report (2007) has deepened understanding of the magnitude of climate change, its consequences and possible policies to reduce and mitigate its effects. The combustion of fossil fuels is the largest single contributor to carbon dioxide (CO2) and total greenhouse gas (GHG) emissions and, of all major sources, has grown the most rapidly over the period 1970 to the present. Furthermore, the IPCC 2007 report shows that a long-observed trend in declining global CO2 emission intensity per unit of GDP reversed around the year 2000. This means that, with world economic growth the strongest in decades, global CO2 emissions are growing faster than at any time since 1970.

The growth of CO2 emissions over time has shown substantial variation among countries, and there is considerable interest as to which countries have recently experienced rapid growth of emissions and why. The relation between this growth and changes in various structural factors in the economies, such as the energy intensity and the share of fossil fuels in total energy consumption, as well as of the growth of the economy itself, has been the focus of a number of studies.

The principal findings of the report are:

1. The 70 largest emitters of CO2 from fossil fuels in 2004 covered 95% of the global total. In terms of the country level of emissions, the largest emitters were largely drawn from higher income developed countries, but it also included all the G+5 countries. In addition, several large oil producing countries were in the top thirty. During the period 1994-2004, some fifteen countries experienced a fall in CO2 emissions from fossil fuel consumption, and this group comprised mainly former Soviet Union and Eastern European countries. The iii percentage growth in emissions during the decade showed considerable variation among countries, with some large emitters experiencing large growth, and others relatively low growth.

2. The ratio of CO2 emissions from consumption of fossil fuels to the total GHG emissions is more than 50% for 55 of the countries, and rises to more than 80% for 14 countries. The group of countries where the ratio is particularly low includes those where the most effective policies to reduce GHG emissions are likely to be distinct from those designed to reduce CO2 emissions from fossil fuels.

3. The inter-country distribution of emissions per unit of GDP per capita (emissions intensity) was measured using GDP at purchasing power parity (PPP) and at market exchange rates (MER). The emissions intensity was for most countries very much lower on the former measure. The ranking of countries by emissions intensity also changed substantially relative to the ranking by total emissions, and was not systematically related to GDP per capita.. Since the ratio of the measure of GDP at PPP to GDP at MER stayed constant throughout the decade, the percentage change in emissions per unit of GDP was identical for the two measures, and the analysis of changes in emissions utilized the PPP measure.

4. The ranking of countries by emissions intensity changed substantially relative to the ranking by total CO2 emissions. The G+5 countries, with the exception of South Africa, ranked very much lower on emissions intensity than on total emissions among the group of 70 countries studied. Several middle-income countries were amongst those with the highest rankings.

5. Emissions per capita were positively but only moderately correlated with GDP per capita and showed no evidence of an eventual decline in emissions per capita at higher per capita income (the Environmental Kuznets Curve phenomenon). The rankings relative to those for total emissions, or emissions per unit of GDP were quite different. Some countries with large populations, such as India and Indonesia, moved almost to the bottom of the ranking based on this measure, while some countries with small populations moved to the top of the rankings.

6. The decomposition analysis related the change in emissions during the decade to changes in the five factors. For the group of countries as a whole, GDP per capita was the dominant variable linked to the growth in total emissions, with population being only one half as important. However, the decrease in energy intensity was so large that it offset about forty percent of the combined influence of these two factors. The fossil fuel mix showed a small negative effect on the change in emissions, while the share of fossil fuels in total energy consumption contributed a small increase to the change in emissions.

7. The relative importance of the three factors that could be directly linked to policies to slow down the growth of emissions (fossil fuel mix, share of fossil fuels in total energy and energy intensity of GDP) to the positive effects of GDP growth is measured by the “offsetting” coefficient. For the decade as a whole, fifteen countries more than offset the combined impacts of GDP and population growth. This group consisted mainly of former Soviet Union and Eastern European countries, but also included two Scandinavian countries, whose policies towards emissions may give important clues for other countries wishing to slow the growth of emissions. There were also a group of nineteen countries where the changes in the potential offsetting factors actually led to a further increase in emissions beyond that which would have been expected from the growth of GDP (“negative offsetting”). The group included several oil producers, but also some non-oil producing high income developed countries.

8. Among countries with the largest absolute emissions, the USA was able to offset a sizeable fraction of its growth in emissions but, given the size of the economy, the increment was still large. By contrast, Japan, with relatively low income and population growth, experienced negative offsetting, but the total increment was relatively small. Russia fully offset the growth in emissions related to income and population during this period but, given that population decline and massive changes in sectoral structure and energy efficiency were stimulated by the political changes during this period, a similar performance may be difficult to maintain in the coming decade. China and India, while enjoying rapid growth during the decade, were also able to offset significant portions of the potential growth in emissions.

9. When the data was split into two five-year sub-periods, it became apparent that for some countries large shifts in structure had taken place in the course of the decade. For one group of countries, the coefficient of offsetting increased substantially – this group included several developing countries. An important group of thirteen countries experienced negative offsetting in both sub-periods, indicating that this was a longer-term trend – the group included some major oil producers, and some high income non-oil producing countries. Six countries moved from positive to negative offsetting between the two sub-periods, indicating that they had actually seen emissions rise faster relative to GDP. The experiences of the largest emitters across the two sub-periods were quite different. The USA and India both experienced substantial offsetting throughout the period, while China and Russia both experienced high offsetting in the first period, but much reduced offsetting in the second. For the group as a whole, there was no apparent correlation between the improvement in offsetting and the level of GDP, indicating that during the period studied higher income countries had not performed better in slowing the growth of emissions relative to GDP.

10. However, a number of countries did experience improved performance of emissions relative to GDP, suggesting that there need not be a negative trade-off between slowing the growth of emissions and maintaining high growth rates of the economy. Countries that were particularly successful in achieving high offsetting could well serve as case studies for how this might be achieved. On the other hand, the experience of several countries also makes it clear that, without active policies to curb the emissions intensity of the economy, emissions can actually increase faster than GDP, even when GDP has reached a high level. More detailed analysis could shed further light on the factors determining aggregate energy intensity for an economy, since this factor appears to have accounted for the largest differences in performance between economies, once the growth of GDP is allowed for. In particular, the distinction between changes due to sectoral composition and changes due to improvements in energy efficiency may be helpful in giving clues as to the future course of emissions, and the possibilities of finding policies that could make a substantial difference to global CO2 emissions.

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