Structural decomposition analysis and input-output subsystems: An application to Spanish CO2 emissions

Analysis of gas emissions by the input-output subsystem approach provides detailed\ninsight into pollution generation in an economy. Structural decomposition analysis, on\nthe other hand, identifies the factors behind the changes in key variables over time.\nExtending the input-output subsystem model to account for the changes in these\nvariables reveals the channels by which environmental burdens are caused and\ntransmitted throughout the production system. In this paper we propose a decomposition\nof the changes in the components of CO2 emissions captured by an input-output\nsubsystems representation. The empirical application is for the Spanish service sector,\nand the economic and environmental data are for years 1990 and 2000. Our results show\nthat services increased their CO2 emissions mainly because of a rise in emissions\ngenerated by non-services to cover the final demand for services. In all service\nactivities, the decomposed effects show an increase in CO2 emissions due to a decrease\nin emission coefficients (i.e., emissions per unit of output) compensated by an increase\nin emissions caused both by the input-output coefficients and the rise in demand for services. Finally, large asymmetries exist not only in the quantitative changes in the\nCO2 emissions of the various services but also in the decomposed effects of these\nchanges.\nKeywords: structural decomposition analysis, input-output subsystems, CO2 emissions,\nservice sector.