Environmental Structural Decomposition Analysis of Italian Emissions, 1995-2005

This study analyses the evolution of greenhouse gas (GHG) emissions and acidification emissions for Italy in the years 1995-2005. Looking at data, while emissions that contribute to the local problem of acidification have been decreasing quite constantly, GHG emissions have been showing a slight increase due to the rise of carbon dioxide. The aim is therefore to highlight how different economic factors have driven the evolution of Italian emissions. The main factors considered are economic growth, the development of a technology allowing a more environment-friendly way of production, and the structure of consumption. The methodology proposed is a structural decomposition analysis (SDA), a method that permits to decompose the changes of the variable of interest among different driving forces and to reveal the relevance of each factor. Moreover, the analysis considers the relevance of international trade and it tries to deal with the problem of responsibility. That is, through international trade relationships a country could be exporting polluting production processes without a real reduction of the pollution implied in its consumption pattern. For this purpose, the SDA is firstly applied to the emissions caused by domestic production. This corresponds to a production-based approach (PBA). Successively, the analysis moves toward a consumption-based approach (CBA) and the decomposition is applied to emissions related to domestic production or foreign production that satisfies domestic demand. In this way the exercise allows a first check of the importance of international trade and it highlights some results at global as well at sector level that can indicate in which direction further analysis should be carried on.