Multi-country comparisons of CO2 emission intensity: The production-theoretical decomposition analysis approach

Comparing CO2 emission intensities of multiple regions reveals the sources of regional disparities and helps regions, especially the low-performing ones, to identify strategies for improving carbon performance. Conducting the comparison from a production perspective can help policymakers pinpoint opportunities to improve the general production system to reduce national emission intensity. This study proposes a spatial production-theoretical decomposition analysis (PDA) approach for such a purpose. Built upon the production theory framework, the proposed spatial PDA model quantifies the impacts of carbon technical performance, potential carbon factor and economy structure on regional disparities in emission intensity. Inter-factor substitution effects are further captured by using a two-stage decomposition procedure. Relevant methodological issues are discussed. The spatial PDA model is then applied to compare the emission intensities of 14 global economies in 2007. It is shown that the proposed model reveals the driving forces of regional disparities from viewpoints of production technology and technical efficiency, and is useful to shape pertinent policy measures aiming at promoting national emission intensity.