Exploring the CO2 emissions drivers in the Nigerian manufacturing sector through decomposition analysis and the potential of carbon tax (CAT) policy on CO2 mitigation

Abstract

The CO2 emissions trend and their reduction potential in the Nigerian manufacturing sector from 2010 to 2020 were studied. The Logarithmic Mean Divisia Index was applied to decompose the change in CO2 emissions into pre-set factors: carbon intensity effects, firm energy intensity effects, cost structure effects, asset-turnover effect, asset-to-equity effect, equity-funded production effect and productive capacity utilization. The results show that the change in emissions increased by $$1668\times {10}^{12}$$ 1668 × 10 12 GJ between 2010 and 2020. Energy intensity and equity-funded production were the leading drivers of increased emissions, while productive capacity utilization reduced emissions. The CO2 emissions increased throughout the study, except for a few periods. Without a carbon tax policy, the results show that firm-level drivers increased CO2 emissions in the business-as-usual scenario. However, under the 5% carbon tax (CAT) policy scenario on energy consumption, there was a reduction in CO2 emissions between 2010 and 2020. Furthermore, a CAT policy of 5% on energy consumption reduced CO2 emissions by 22%. A further implication of CAT policy, given its interaction with firm-level drivers, resulted in lowering CO2 emissions in the interactional scenario. The findings indicate productive capacity utilization, equity-funded production, and CAT impacted CO2 emissions variation.

Impact of asset intensity and other energy-associated CO2 emissions drivers in the Nigerian manufacturing sector: A firm-level decomposition (LMDI) analysis

“…Furthermore, Xin et al [ 39 ] and Song et al [ 40 ] employed the LMDI technique to evaluate the driving factors of industrial carbon emissions (ICE) and the contributions of each province to China's ICE at different time intervals. Other studies based on the LMDI application are summarized in Table 1 [ [41] , [42] , [43] , [44] , [45] , [46] , [47] , [48] ].…”

“… LMDI 1990–2007 The primary reason for the fall in emissions was a reduction in energy intensity. [ 42 ] Exploring the emissions drivers in the Nigerian manufacturing sector through decomposition analysis and the potential of carbon tax (CAT) policy on mitigation Carbon intensity, firm energy intensity, cost structure, asset turnover, asset-to-equity, equity-funded production, and productive capacity utilization LMDI 2010–2020 Energy intensity and equity-funded production were the leading drivers of increased emissions, while productive capacity utilization reduced emissions. [ 43 ] Decomposed the factors that affect the emissions of China's manufacturing industry Investment intensity, industrial scale, industrial activity, R&D efficiency, R&D intensity, energy intensity, and emission factor LMDI 1995–2015 The industrial activity effect was the most crucial factor leading to increased emissions in the manufacturing sector.…”

“…The studies presented in Table 1 have contributed substantially to enriching research in decomposition analysis. Though, from the reviewed energy-related drivers [ [41] , [42] , [43] , [44] , [45] , [46] , [47] , [48] ], the contributions of each driver are presented in Fig. 1 .…”

“…While others, for instance, energy structure, income effect, investment intensity, and substitution effect, were not greater than 2 %. However, apart from Inah et al [ 42 ], none of the reviewed studies ( Table 1 ) examined carbon emissions trajectory at the firm-level and asset intensity as a driver of emissions. Thus, to close this gap, the current research proposes including asset intensity as an emission driver and generating data that could assist in policy drive.…”