Convergence of carbon dioxide performance across Swedish industrial sectors: An environmental index approach

- We analyze convergence of CO2 emission intensity across manufacturing sectors in Sweden.
- A production theory framework is used to construct a CO2 performance index.
- We employ a data set covering 14 industrial sectors over the time period 1990-2008.
- The results suggest the presence of conditional β-convergence in CO2 performance among the industrial sectors in Sweden.
- The higher the capital intensity is, the lower is the convergence rate to the different steady states.

The overall objective of the paper is to analyze convergence of CO2 emission intensity across manufacturing sectors in Sweden. Our approach differs from previous work on carbon convergence in that it employs a theoretical framework to construct a CO2 performance index, which explicitly takes into account that industrial firms produce good as well as bad outputs. This index is then used as the dependent variable in a growth-type regression equation. We employ a data set covering 14 industrial sectors over the time period 1990-2008. The results suggest the presence of conditional β-convergence in CO2 performance among the industrial sectors in Sweden. Moreover, the speed of convergence varies significantly in the sense that the higher the capital intensity is, the lower is the convergence rate to the different steady states. This is likely to reflect the importance of - and in part the costs associated with - capital turnover to achieve a transition towards lower CO2 emission paths.