Abstract
U.S. output has steadily outpaced the rise in greenhouse gas (GHG) emissions over the past several decades. The decoupling of these two trends represents a decline in aggregate GHG emission intensity. Using recently released national datasets covering industry-specific GHG emissions and shipments, this paper decomposes the relative importance of changes in various channels underlying changes in aggregate GHG emissions in the U.S. from 1997 to 2015: scale or national output growth, cross-sector composition changes, and a technique effect capturing other factors lowering emission intensities within the country’s productive industries. The results demonstrate that reductions in within-sector techniques explain two-thirds, and cross-sector shifting of economic activity towards cleaner industries explains one-third of the increasing gap. Using data on industry exports and imports, this paper further investigates the relative environmental effect of trade on GHG emissions. Together, increased exporting, and importing, of both intermediate and final goods, has corresponded to a relatively small expansion of cleaner sectors and appears to have contributed slightly to the relative expansion of cleaner U.S. industries. In 2015, U.S. imports of intermediate and final goods account for the displacement of roughly 290 million metric tons of U.S. GHG emissions, representing less than 5% of U.S. GHG emissions in the same year.
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Notes
Author calculations using U.S. Bureau of Economic Analysis (BEA) real GDP measures and GHG emission measures from the U.S. EPA (Environmental Protection Agency 2017).
Decoupling can take two forms (UNEP 2011; Vavrek and Chovancova 2016): absolute decoupling and relative decoupling. With relative decoupling, the growth rate of the rate of GHG emissions is lower than the growth rate GDP; that is, the association is still positive, but the elasticity is less than 1. With absolute decoupling, emissions decline even as GDP continues to increase. U.S. CO2 emission display relative decoupling for the period between 1970 and 2005, then absolute decoupling from 2006 to 2015. See also https://data.worldbank.org/indicator/EN.ATM.GHGT.KT.CE.
From 1990 to 2017, the average CO2 share of U.S. GHGs is 82%, followed by methane (10%), nitrous oxides (6%) and other fluorinated gas (2%) (https://cfpub.epa.gov/ghgdata/inventoryexplorer/#iallsectors/allgas/gas/all).
Data from input–output tables published by the BEA, and GHG emissions data from the EPA (Environmental Protection Agency 2017).
In contrast, Barrows and Ollivier (2016) find evidence of a much stronger composition effect in India, while Lise (2006) and Ipek Tunç et al. (2009), studying data for four aggregated sectors in Turkey, find little evidence of decoupling of output and GHG emissions in Turkey. These results for two less developed countries suggest that the relative importance of the various channels may change as countries develop.
The EPA began making important steps towards regulating GHG emissions in 2007 when the U.S. Supreme Court upheld the EPA’s authority to regulate GHG emissions under the Clean Air Act if a threat to public health were demonstrated [Massachusetts v. Environmental Protection Agency, 549 U.S. 497 (2007)].
Although the Environmental Protection Agency (EPA) has been gathering data related to U.S. GHG emissions almost since its inception in 1970, the EPA did not begin the process of issuing GHG permits to polluting facilities until 2011.
Cherniwchan et al. (2017) provide a comprehensive overview of related literature and findings.
From 1736 kg (kg) CO2/tonne in the U.S. to 2148 kg CO2/tonne in China.
Report number: EPA 430-P-17-001, EPA 2017 GHG Report.
BEA also provides industry-specific price indices and all of the following results are presented using constant prices.
GWP weights used by the EPA were obtained from the Intergovernmental Panel on Climate Change (Pachauri and Reisinger 2007). For CO2 the weight is 1, for N2O it is 298, and for CH4 it is 25.
The EPA-report also includes emissions due to Residential and U.S. Territories, but we limit our focus to productive U.S. sectors to match with the BEA economic output data.
Two manufacturing industries, petroleum products (324) and plastic products (326), are combined and matched with the EPA activity “Petrochemical Production”.
The mean values for each of the 58 sample industries are provided in Table 6 in the appendix.
The percent-change from period 1 to period 2, in each channel, is calculated using the midpoint formula: (X2 − X1)/[(X2 + X1)/2].
Roughly one percentage point of the 17% point decline due to the composition effect, or 5.9% of the total output-emissions gap, can be attributed to additional pressure due to trade.
As with the previous analysis, since imports are categorized as “commodities” we first calculates the share of each commodity import that would have been produced by each industry. We then multiply the implied industry output avoided by offshoring by each industry’s emissions intensity from that year.
This result stands in contrast with findings by Shapiro and Walker (2018) suggesting that the majority of clean-up in manufacturing emissions is consistent with substantial increases in environmental regulation.
The EPA report also includes GHG emissions for the residential sector, as well as U.S. Territories. We focus on emissions associated with productive activity for which we have corresponding economic activity data from the BEA.
The only GHG emissions associated with construction in the EPA report are assigned to the “Industrial” sector, and are included in the industrial activity “Mobile Combustion” (see EPA-report pp. 3–38 and 3–40). In total, the emissions associated with this industrial activity (which includes both construction and non-construction related mobile combustion), never exceed 0.1% of industrial emissions.
Described in the EPA-report pp. 2–12 and 3–4.
Additional description of the EPA approach is discussed in the EPA-report (pp. 3–4 and 3–18).
The EPA-report attributes both mining and manufacturing activities to the “Industrial” sector. The BEA I–O data includes three mining sectors (211, 212, 213), and 19 manufacturing sectors (31–32). We used the same approach to distribute emissions from the Commercial sector’s “Energy and Fuel Use” activity to “Waste management and remediation services” (562) as well as the other 33 commercial industry I–O codes: 42, 44, 45, 4A, 49, 51–81 (including real estate and housing services: ORE and HS), and G.
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Acknowledgements
We would like to thank Mausami Desai (EPA) for help discovering and accessing the GHG emission data. We would also like to thank Rick Adkisson and Jim Peach and three anonymous reviewers for helpful comments and discussion that improved the manuscript.
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This research did not receive any specific Grant from funding agencies in the public, commercial, or not-for-profit sectors.
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Appendices
Appendix A: Additional results
In the main text, the analysis is limited to industries in four major sectors: agricultural, commercial, and the mining and manufacturing sectors (the latter two are generally combined, in the EPA-report into a singe “Industrial” sector). Results presented in Fig. 4 (analogous to Fig. 2, discussed in the main text) are estimated using emissions and output data covering 58 industries from six (instead of four) major productive U.S. sectors, by adding output, trade, and CO2e data for the utilities and transportation sectors. The dataset covers nearly 100% of U.S. output. The interpretation of each channel identified in Fig. 4 is identical to the interpretation discussed for Fig. 2 in the main text. Adding in the output and emissions of the largely non-traded electric-utility and transportation industries, the absolute decline in CO2e emissions does not begin until 2007/2008. Consequently, the overall decline in CO2e emissions is smaller than the decline documented in Fig. 2 (a seven percent decline compared to a 12% decline). In general, though, the results are qualitatively similar to those presented in the main text.
Change in U.S. CO2e emissions: all 5 productive sectors. This figure is the corollary to Fig. 2. The results presented in this figure are, instead, based on data from 58 (instead of 56) industries, are obtained by adding in output, trade, and CO2e data from the utility and transportation industries. The interpretation of each numbered channel is otherwise identical to Fig. 2
Appendix B: Matching procedure
Annual BEA economic input–output (I–O) and trade data purport to cover all of the economic activity in the United States. These data, along with associated price indices, are publicly available and have been dis-aggregated by 71 industries back to 1997. The EPA-report details GHG emissions used in this paper, drawn primarily from tables 2 to 3 and 2 to 10. The EPA-report relies in part on energy-use data from the EIA which reports CO2 emission data across six major productive U.S. sectors: mining and manufacturing (which together comprise the “Industrial” sector), agriculture, commercial, transportation, and utilities.Footnote 22 The EPA-report additionally decomposes sector-level emissions into various specific activities that are responsible for significant shares of the sector totals.
To accomplish a more detailed industry-level match of GHG emissions and economic activity, we first aggregated the I–O data of seven 3-digit industries (481–487), provided by the BEA, to a single 2-digit (48) “Transportation” industry. We also aggregated the five industries covering federal, state, and local activity to a single “Government” industry (G). Finally, we combined the data for two manufacturing industries, “Petroleum and Coal Products” (324) and “Plastic and Rubber Products” (326), which, together, were matched to to GHG emissions associated with the “Petrochemical Production” activity. This aggregation reduced the 71 BEA industries to 60. Due to the lack of associated GHG emission data, we dropped two BEA industries, “Forestry” and “Construction”, from the analysis,Footnote 23 resulting in a final set of 58 industries which we matched to GHG emission data in the EPA-report. The primary analysis in the paper omits the two Utilities and Transportation industries. Results including all 58 industries are included in “Appendix A”.
Using definitions and glossaries provided by the EIA and BEA, we manually matched the BEA industries and EPA/EIA activities as shown in Table 4. Column (1) lists the parent EIA sectors associated with the reported GHG emission data. Column (2) lists the activity descriptions by which the GHG emissions are decomposed. Column (3) lists the industry descriptions from the BEA I–O tables to which each GHG activity was matched. Column (4) lists the BEA I–O codes (which align with 2007 NAICS codes) associated with each BEA industry description. In a few instances, the sector-to-industry match was one-to-one: all agricultural sector emissions were matched to the “Farming” industry (111), all emissions from the electricity sector were matched to the “Utilities” industry (22), and all transportation sector emissions were matched to the “Transportation” industry (48).
In addition to decomposing the GHG emissions of the various sectors by various specific emission-intense activities, the EPA report decomposes emissions into other energy and fuel uses, including “CO2 from Fossil Fuel Combustion”, “Mobile Combustion”, “Stationary Combustion”, and “Non-Energy Use of Fuels”. Emissions from these activities were assigned by the EPA to the respective sectors based on industry energy consumption data from the EIA.Footnote 24 For industries in the commercial and industrial (mining and manufacturing) sectors, we reverse the EPA aggregate approach,Footnote 25 by assigning emissions associated with these combustion activities in each sector to BEA industries based on each industry’s annual share of energy usage, taken from the BEA’s KLEMS database (capital, labor, energy, materials, services). We distributed industrial combustion-related emissions in this manner to all 22 mining and manufacturing industries, and we similarly distributed commercial combustion-related emissions to all 34 “Commercial” industries in the BEA data.Footnote 26 Table 5 provides associated industry descriptions from the BEA.
The GHG emission activities that were matched, in Table 4, to the I–O code “Other” for commercial and industrial sectors were dropped from the analysis due to the lack of a clear corollary in the BEA industry descriptions. These “Other” emissions represent less than one percent of total emissions, and less than 4.1 (0.1) percent of industrial (commercial) emissions.
Table 6 provides the average, from 1997 to 2015, of the annual industry measures of output, imports, exports, and GHG emissions for each of the 58 industries in the dataset. This table is an expanded version of the data summarized in Table 1.
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LaPlue, L.D., Erickson, C.A. Outsourcing, trade, technology, and greenhouse gas emissions. Environ Econ Policy Stud 22, 217–245 (2020). https://doi.org/10.1007/s10018-019-00256-4
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DOI: https://doi.org/10.1007/s10018-019-00256-4
Keywords
- Emission decomposition
- Environmental accounting
- Greenhouse gas emissions
- Offshoring
- Trade and environment