Tracking European Union CO2 emissions through LMDI (logarithmic-mean Divisia index) decomposition. The activity revaluation approach

Aggregate CO2 emitted to the atmosphere from a given region could be determined by monitoring several distinctive components. In this paper we propose five decomposition factors: population, production per capita, fuel mix, carbonization and energy intensity. The latter is commonly used as a proxy for energy efficiency. The problem arises when defining this concept, as there is little consensus among authors on how to measure energy intensity (using either physical or monetary activity indicators). In this paper we analyse several measurement possibilities, presenting and developing a number of approaches based on the LMDI (logarithmic-mean Divisia index) methodology, to decompose changes in aggregate CO2 emissions. The resulting methodologies are so-called MB (monetary based), IR (intensity refactorization) and AR (activity revaluation) approaches. Then, we apply these methodologies to analyse changes in carbon dioxide emissions in the EU (European Union) power sector, both as a whole and at country level. Our findings show the strong impact of changes in the energy mix factor on aggregate CO2 emission levels, although a number of differences among countries are detected which lead to specific environmental recommendations.