The Drivers of Greenhouse Gas Emissions Intensity Improvements in Major Economies: Analysis of Trends 1995–2009

AuthorMadanmohan Ghosh,Deming Luo,Yunfa Zhu,Thomas Rutherford,Muhammad Shahid Siddiqui
Publication Date01 Aug 2020
DOI10.1177/0015732520920769
SubjectArticles
The Drivers of Greenhouse
Gas Emissions Intensity
Improvements in Major
Economies: Analysis of
Trends 1995–2009
Madanmohan Ghosh1, Deming Luo2,
Muhammad Shahid Siddiqui1, Thomas
Rutherford3 and Yunfa Zhu2
Abstract
This article analyses the trends in greenhouse gas (GHG) emissions intensity
over the period 1995–2009 in a mix of developing and developed economies
that account for almost two-thirds of global emissions. From the accounting
point of view, it distinguishes between the production-based emissions (PBEs)
and consumption or demand-based emissions (DBEs). Several studies find that
while PBEs in many developed economies during the last decades have stabilised,
the DBEs are on the rise. Understanding the relative influence of various factors
that have shaped the different patterns of emissions growth can provide us with
important policy insights for controlling GHG emissions. The article undertakes
a decomposition exercise to understand the variations/fluctuations in both PBEs
and DBEs intensities due to changes in technology and changes in economic
structure (i.e., composition of aggregate production and final consumption). The
main findings of this article are that, over the period 1995–2009, technological
change has been the key driver of emissions intensity improvements in both PBEs
and DBEs. Emissions intensity improvements in consumption activities have been
Article
1 Model Development and Quantitative Research Division, Economic Analysis Directorate,
Environment and Climate Change, Quebec, Canada.
2 Statistics Canada, Ottawa, Canada.
3 Department of Agricultural and Applied Economics, University of Wisconsin, Madison, WI, USA.
Corresponding author:
Madanmohan Ghosh, Model Development and Quantitative Research Division, Economic Analysis
Directorate, Environment and Climate Change, 200 Sacre-Coeur, Gatineau, Quebec, K1A 0H3,
Canada.
E-mail: madanmohan.ghosh@canada.ca
Foreign Trade Review
55(3) 277–297, 2020
© 2020 Indian Institute of
Foreign Trade
Reprints and permissions:
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DOI: 10.1177/0015732520920769
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278 Foreign Trade Review 55(3)
slower than production, particularly in EU 27. Structural changes or changes in
the composition of aggregate production and demand have relatively smaller con-
tribution in overall intensity improvement. Structural shifts in the economy have
somewhat negatively contributed to emissions intensity improvements in Canada
and China. In India, structural shifts in both production and consumption activities
have contributed significantly to emissions intensity improvements. When taking
account of trade, changes in the sources of imports have worked against overall
emissions intensity improvements, particularly in the developed economies of
Canada, European Union (EU 27) and USA, where imports from relatively emis-
sions intensive sources have increased during the period.
JEL: D58, Q56, O13
Keywords
GHG emissions intensity, demand-based emissions, embodied emissions
Introduction
Successive assessment reports of the Intergovernmental Panel on Climate Change
(IPCC) including the latest (6th) concluded that increasing levels of CO2 and
other greenhouse gas (GHG) emissions in the atmosphere has been the dominant
driver of global warming over the industrial era. The IPCC stipulates that in order
to keep global average warming to 2°C above pre-industrial levels by the turn of
the century, the cumulative sum of emissions (since the pre-industrial era) needs
to be limited to about one trillion tonnes of carbon. About half of this amount has
already been emitted. Thus, to a varying degree, all economies in the world are
under increasing pressure to reduce GHG emissions and efforts to reduce GHG
emissions are already underway, although supposedly not enough. At the Paris
Agreement of 2015, more than 190 countries came forward and agreed to cooper-
ate on emissions abatement through ‘nationally determined contributions’ and to
strengthen their efforts in the years ahead. These efforts would involve dramatic
reductions in emissions intensities, and even net zero emissions in the decades
ahead. This article takes a historical perspective and makes an attempt to under-
stand the drivers of changes to emissions intensity in the major world economies
(developed and developing) in the past decades in order to be able to better address
policy issues around emissions reductions.
On average, GHG emissions from developed economies have somewhat
stabilised since 1990; however, emissions have been increasing rapidly in large
developing economies during the last two decades. This has been partly the result
of the economic transformation (or structural shifts in the economies) and growth
these economies are experiencing. As laid down in Polanyi’s (1944) Great Trans-
formation, economies advance from an initially dominant agricultural sector into
fledgling labour intensive manufacturing industries (such as textiles and apparel)
and then move up a technology ladder to more sophisticated but still labour
intensive manufacturing (e.g., furniture), and onto heavy industry (such as steel,

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