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Gone with the wind: A structural decomposition of carbon emissions

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  • António Rua
  • Fátima Cardoso

Abstract

climate and environmental policies aimed at promoting sustainable development and human well-being. The importance of reducing the carbon footprint has long been acknowledged and the European countries have been paving the way in this respect. In particular, we focus on Portugal where a striking reduction of carbon emissions has been observed in just a few years. We perform a structural decomposition analysis over the last two decades allowing to unveil the main drivers underlying the evolution of carbon emissions. We find that the investment on renewable energy sources, namely wind, has been key for a successful transition to a cleaner economy. The impact has been felt both on the reduction of carbon intensity as well as on the increase of energy efficiency in power generation. We also find that such benign evolution was partly counterbalanced by the increase of the contribution of final demand to carbon emissions despite being attenuated with the COVID-19 pandemic. These findings highlight the importance of the adoption of renewable energy sources to support a further mitigation of the carbon footprint in a context of economic growth.

Suggested Citation

  • António Rua & Fátima Cardoso, 2023. "Gone with the wind: A structural decomposition of carbon emissions," Working Papers w202312, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w202312
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    File URL: https://www.bportugal.pt/sites/default/files/anexos/papers/wp202312.pdf
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