Analysis of the carbon footprint. Evolution in Spain : economic drivers

Abstract

There is now an almost unanimous agreement that emissions of greenhouse gases contribute in an essential way to the change of the global climate. For decades, the increasing human activity has led to more emissions. That is why most of the regulatory bodies have already taken action under this context. Several energy policies are highlighted throughout this document. Some of them include European energy policies and United Nation’s agreements like Kyoto and Paris. All of them share the common objective of stimulating the reduction of greenhouse gases emissions as much as possible, deal with climate change, emissions monitoring and setting targets for the upcoming years. Spain has gradually adapted to these changes with the publication of national laws and regulations as well as the definition of national targets like the National Energy and Climate Plans (NECPs) document. One of the most harmful gases within the greenhouse gases is carbon dioxide. CO2 emissions evolution can be affected by various factors such as energy efficiency, the structure of the economy, fuel prices, improvements in processes or technological advances. These variables also alter the performance of the energy intensity indicator that has a close relationship with CO2 emissions. Because the concept of CO2 emissions implicitly includes factors that generate opposite effects, sound conclusions could not be extracted from simply observing the trend of the historical evolution of this large aggregate magnitude. This leads to the necessity of introducing econometric analysis. Former literature has already placed some suggestions for the study of the decomposition of environmental and energy indicators. Some of them only cover approximately until the year 2007, others did not decompose the effect into a very detailed sectoral level. Also, decomposition analysis has been applied to other environmental or energy indicators such as energy intensity. The aim of this project is to assess how these factors have affected the evolution of CO2 emissions in Spain from 2008 to 2016. It goes a little bit further compared to other studies by including the best level of detail possible, reasonable number of decomposition factors and update the information. This gives the opportunity of providing a national outlook of the Spanish carbon footprint. The impact the productive sectors of the economy whose information is available had in each effect is presented. The Logarithmic Mean Divisia Index (LMDI) has been selected as the core methodology based on the evaluation of the main classification of methodologies proposed for decomposition analysis, statistical information available and the desired format for the results. It stands out for providing a perfect decomposition with no residual component, ease when computing with either in an additive or multiplicative form, consistency with aggregation and possibility of incorporating more than two factors. The main idea behind this technique is that is able to decompose the variation of an indicator into the sum or multiplication of different effects. As a result, the variation of CO2 emission between two years has been decomposed into four different effects. The intrasectoral effect related to energy intensity, emission coefficient related to fewer pollutant technologies, a structural effect related to the activity mix by sub-category and activity effect associated to the change in the overall level of the activity. If a decomposition of the trend of CO2 emissions evolution is made from 2008 and 2016, following the application of index decomposition and considering the available statistical information, has yielded to the results represented and summarized in Table 1. It shows the impact each sector had on the aggregate indicator of Spanish CO2 emissions measured in millions of tons of equivalent CO2. aggregation and possibility of incorporating more than two factors. The main idea behind this technique is that is able to decompose the variation of an indicator into the sum or multiplication of different effects. As a result, the variation of CO2 emission between two years has been decomposed into four different effects. The intrasectoral effect related to energy intensity, emission coefficient related to fewer pollutant technologies, a structural effect related to the activity mix by sub-category and activity effect associated to the change in the overall level of the activity. If a decomposition of the trend of CO2 emissions evolution is made from 2008 and 2016, following the application of index decomposition and considering the available statistical information, has yielded to the results represented and summarized in Table 1. It shows the impact each sector had on the aggregate indicator of Spanish CO2 emissions measured in millions of tons of equivalent CO2.