Sector CO2 and SOx emissions efficiency and investment: homogeneous vs heterogeneous estimates using the Italian NAMEA

The relationships between emissions ad economic drivers differ substantially both across countries and across sectors. In this paper I investigate cross-sector heterogeneity of emissions (CO2 and SOx) / investments relationships of Italian branches for the period 1990-2006 by using the Italian NAMEA (National Accounting Matrix including Environmental Accounts). The ‘environmental’ direction of investments in different types of capital goods is crucial in the prediction of future patterns of environmental efficiency due to the persistence of the choices regarding the features of the capital stock. Within this relationship, the role of variations in prices of energy fuels and in environmental taxes is considered to identify relevance and the direction of the technical changes induced by prices and taxes. I compare homogeneous estimates (FE) with heterogeneous estimates (SUR): homogeneity of slopes across branches is always rejected (aggregation bias). Furthermore, results differ substantially between CO2 and SOx, due to different environmental and economic features of the two types of emissions. Results show a relevant role of economic forces (investments) in explaining CO2 dynamics while SOx trends are determined to higher extent by exogenous events. The potential role of ICTs in promoting more environmental efficient production processes has not been exploited yet by Italian manufacturing sectors.