Structural decomposition analysis and input-output subsystems: Changes in CO2 emissions of Spanish service sectors (2000-2005)

The analysis of gas emissions by an input-output subsystem approach provides detailed insight into pollution generation in an economy. Structural decomposition analysis, on the other hand, identifies the factors behind the changes in key variables over time. Extending the input-output subsystem model to account for the changes in these variables reveals the channels by which environmental burdens are caused and transmitted throughout the production system. In this paper we propose a decomposition of the changes in the components of CO2 emissions captured by an input-output subsystems representation. The empirical application is for the Spanish service sector, and the economic and environmental data are for years 2000 and 2005. Our results show that services increased their CO2 emissions mainly because of a rise in the emissions generated by non-services to cover the final demand for services. The decomposed effects show a decrease in CO2 emissions due to technological changes between 2000 and 2005 compensated by an increase in emissions caused by the rise in final demand of services. Finally, large asymmetries exist not only in the quantitative changes in the CO2 emissions of the various services but also in the decomposed effects of these changes.