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Artikel (19/05/2006)

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Decomposition analysis of changes in CO2 emissions by the Belgian industries

Within the Belgian National Accounts Institute, the Federal Planning Bureau (FPB) has been assigned responsibility for the environmental satellite accounts. One of these accounts is the National Accounting Matrix including Environmental Accounts for Air pollution (NAMEA Air). The NAMEA Air for Belgium currently contains data on greenhouse gas emissions, acidifying emissions, photochemical emissions, emissions of fine dust particles and emissions of lead for 1990 and for the period 1994-2002. The air pollutant that has received the most attention over the last decade is, without any doubt, carbon dioxide, the emissions of which are closely linked to energy use. This special topic investigates the driving forces behind the changes in CO2 emissions by the Belgian industries by means of decomposition analysis. Emissions by households are thus not considered. The industries were responsible for the largest part of Belgian CO2 emissions, more specifically 76%, in 2002. In that year, CO2 emissions represented 87% of total greenhouse gas emissions covered by the Kyoto protocol.

Decomposition analysis allows a distinction to be made between the impact on CO2 emissions of volume changes and the impact of efficiency changes. These efficiency changes can be linked to either energy efficiency or the emission intensity of the energy mix. Concurrently, the impact of changes in the structure of the economy can be taken into account. The first part of the text briefly explains the methodological issues. Following parts present the decomposition results for CO2 emissions by the Belgian industries between 1990 and 2002.

Decomposition analysis

On the basis of current knowledge and the available data, Belgian CO2 emissions can be decomposed into four underlying causes. These causes are: the emission intensity of the energy used; the energy intensity of value added creation; changes in the structure of the economy, measured by the share of value added of the different industries in GDP and economic growth measured by GDP.

The decomposition method was applied to the 34 industries for which consistent air pollution data exist in the NAMEA Air for Belgium. The sum of the last two explanatory variables shows the impact on pollution of the economic growth of a given industry. Economic growth of an industry consists of two components, namely economic growth of the entire economy (GDP), and the change of the share of the industry in total value added (VAi/GDP). Summing the impacts of the latter over all industries results in the impact on pollution of the change in the economic structure.

Global results

Total CO2 emissions by all Belgian industries increased by about 2.5% between 1990 and 2002. Economic growth during that period equalled 24%. This implies that changes in emission intensity, energy intensity or the structure of the economy must have contributed to the relative decoupling of CO2 emissions from economic growth.

Contribution to relative decoupling of CO2 emissions from economic growth (1990-2002)

Source: FPB calculations

Graph 1 shows that during the period under consideration changes in the three underlying factors have each been one-third responsible for CO2 emission mitigation.

Industry specific results

Impact of underlying causes on CO2 emissions by industry (1990-2002, in %)

NACE Change in CO2 emissions Emission intensity Energy intensity Economic structure Economic growth p.m.: Share in 2002 emissions
40 +2 -4 -31 +13 +24 23.3
27 -15 -4 -17 -18 +24 14.9
26 -7 -4 -8 -19 +24 10.1
60 +21 -2 +1 -2 +24 9.4
24 +18 -28 -15 +37 +24 8.6
01-14 -6 -7 -32 +9 +24 3
15-37 -5 -10 +2 -21 +24 45
40-93 +12 -4 -15 +7 +24 50
Total +2 -8 -7 -7 +24 98

Source: FPB calculations

The upper part of Table 1 shows the decomposition results for those industries with a share in total 2002 CO2 emissions by the industries above 5%. Together, these five industries accounted for two thirds of total emissions. If the three other factors had remained constant, CO2 emissions would have increased by 24% for each of these industries. This was clearly not the case for the three major contributors to CO2 emissions. The energy industry (NACE 40), which accounted for almost a quarter of industry CO2 emissions in 2002, only registered an increase of 2%. The factor that clearly contributed the most to this tempering of CO2 emissions was the decrease in energy intensity. Together with a moderate contribution from the change in the energy mix, this almost fully compensated for the impact of economic growth and structural changes.

The moderately negative impact of changes in emission intensity can also be observed for the basic metals industry (NACE 27), the other non-metallic mineral products industry (NACE 26) and land transport (NACE 60). However, as the impact of energy intensity and economic structure differed strongly among these industries, the resulting changes in emissions were also very diverse. CO2 emissions by the basic metals industry decreased by 15%. Changes in energy intensity and the economic structure contributed equally to this decrease. CO2 emissions by the other non-metallic mineral products industry decreased by 7%, mainly as a consequence of the fall of its share in total value added. CO2 emissions by the land transport industry increased by over a fifth. Its emission intensity, energy intensity and share in total value added barely changed over the period considered. CO2 emissions by the chemical industry (NACE 24) increased by almost a fifth, in spite of the impressive gains that the industry obtained in the fields of emission and energy intensity. This follows from the fact that its importance in the Belgian economy increased even more than that of the energy industry.

The lower part of Table 1 shows that a decrease of CO2 emissions was registered for both the primary sector (NACE 01-14) and the manufacturing industries (NACE 15-37). For the primary industries this was caused chiefly by the fall in energy intensity. For the manufacturing industries the decrease was mainly due to changes in the economic structure. For both aggregated industries, emission intensity also contributed to the decrease of emissions. The downward impacts on CO2 emissions of emission intensity and energy intensity were not able to compensate for the impact of economic growth by the energy, construction and services industries (NACE 40-93). As a consequence, their emissions increased by 12%.

Conclusion

Between 1990 and 2002 changes in the structure of the economy towards less CO2-intensive activities, in the energy mix towards types of energy with a lower carbon content, and in the decrease of the energy intensity of the Belgian industries all compensated for the impact of economic growth on CO2 emissions. All three factors were equally important. However, their impact was not large enough to cause CO2 emissions to fall.

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