Decomposition of aggregate CO2 emissions: A production-theoretical approach

We present a production-theoretical approach to decomposing the change of aggregate CO2 emissions over time using the Shephard input distance functions and the environmental data envelopment analysis (DEA) technology in production theory. Application of the proposed approach requires only some aggregate data and the change of aggregate CO2 emissions can be decomposed into contributions from seven factors. These contributions are obtained through solving a series of DEA models. The key features of the proposed approach are the use of panel data to estimate the production frontier and the inclusion of several production technology related components. Using the proposed approach, we present two application studies on decomposing the CO2 emissions for world regions and OECD countries. A comparison between the proposed approach and other decomposition analysis methods is also presented.