Income and investment, not energy policy, are driving GHG emission intensities

Abstract

Global greenhouse gas (GHG) emissions continue to rise but, at the same time, emission intensities associated with domestic consumption and territorial production have declined albeit at vastly different rates across economies. To identify the socioeconomic factors that drive this cross-country variation, we combine input–output modelling with panel data analysis. Using the World Input–Output Database, we estimate GHG intensities separately for domestic consumption and for territorial production. For the regression analysis, we consider several socioeconomic factors that capture development features, exposure to international trade, as well as energy prices and GHG-relevant programmes. Our results show that development-type factors, such as per capita income, capital-labour ratios, and investments, are the primary drivers of cross-country differences. Energy prices and domestic GHG policies are not major drivers. We also find that reductions in intensities are primarily through changes in techniques rather than compositional changes in the structure of economies.