Drivers of carbon emission intensity in the developed and the developing countries

Abstract

Climate change is one of the most pressing issue that the World is currently faced with. Thanks to unabated release of greenhouse gases into the atmosphere majorly because of incessant industrialization over the past century and a half, there has been an increase in mean global temperatures at surface level by around 0.65 degree Centigrade to around 1.06 degree Centigrade. Major greenhouse gases (GHG) include water vapour, carbon dioxide, methane, nitro oxides and tropospheric ozone. While the now industrialized developed countries share the historic responsibility for such concentration of GHGs, the now developing countries can be blamed for incremental amounts of such gases currently being emitted into the atmosphere. Also the literature studied lacks a comprehensive study on the factors driving the carbon intensity of an economy. This dissertation aims to conduct such a study in the context of both the developed and developing economies in order to understand the underlying dynamics of GHG emissions and therefore recommend suitable policy measures. For this purpose panel data analysis for two sets of countries- developed (consisting of US, Japan, Norway, France and UK) and developing (India China, Brazil, South Africa and Indonesia) are used. From literature carbon intensity is hypothesized to have a relationship with energy intensity, fossil fuel intensity and urbanization. In case of the developed countries, energy intensity was found to be the most significant variable impacting the carbon intensity at the aggregate level. Analysing the trends depicted by the respective variables, it was concluded in case of developed nations, enhanced utilization of energy for economic activity was compensated by the utilization of energy efficient technologies and cleaner fossil fuels like natural gas. Taken together, this has had a net impact of reducing the carbon intensity of such economies. In case of the developed countries, energy intensity was found to be the most significant variable impacting the carbon intensity at the aggregate level. Such countries should continue to promote energy efficiency improvements in their economic activities along while enhancing substitution of fossil fuel based energy sources with clean and green sources like natural gas, renewables and biofuels. Also promoted should be low carbon lifestyles, especially in urban areas so as to reduce the carbon footprint in such countries. In the case of developing countries on the other hand, taken as a whole energy intensity is the only variable that has a statistically significant influence on carbon intensity. Fossil fuel intensity (though insignificant) shows a rising trend. Falling energy and carbon intensities and rising fossil 8 | P a g e fuel intensity points to the impact of efficiency improvements undertaken in such economies. Also, despite the insignificance of the variable proportion of urban population, it can be argued better urban planning is key to reduce the energy intensity and thus carbon intensity of such economies. Recommendations for such countries include enhanced adoption of energy efficient technologies and equipment, reduction in the consumption of fossil fuels and promotion of renewables. Also required is the provisioning for the usage of relatively clean fuels like ‘LPG’ and electricity in rural areas along with implementation of better urban management programmes in such countries.