Tales From the Tails: Sector-Level Carbon Intensity Distribution

Abstract

The level of GDP, its sector composition and the carbon intensity of individual sectors together determine a country’s emissions. To evaluate the contribution of changes in each determinant, I construct counterfactual emissions scenarios in a sample consisting of 34 sectors in 37 countries over 1995–2009. I compare these scenarios quantitatively using a novel metric, namely the relative cumulative emissions. I find that the composition of output and the carbon intensity of sectors individually or jointly constrained emissions in a large majority of countries. This motivates an analysis of high- and low-carbon intensity sectors, denoted HCI and LCI, where emissions and value-added tend to be concentrated, respectively. I document the cross-country variation in HCI sectors’ carbon intensity and show it declines over time largely due to improvements in developing countries. HCI sectors tend to account for a smaller share of employment; be more capital intensive; and employ a workforce with a lower average skill level. Employment declined in HCI sectors and increased in LCI sectors with its composition shifting towards high-skilled workers in both. Capital intensity growth was faster but multifactor productivity growth was slower in HCI sectors.

Economic growth and development with low‐carbon energy

“…The energy intensity of an economy, and its trajectory over time, principally depends on economic structure and technical energy efficiency. Both tend to change through the development process in a way that reduces energy use per unit of monetized economic output, as measured in GDP …”

“…Both tend to change through the development process in a way that reduces energy use per unit of monetized economic output, as measured in GDP. 41,42 Energy use per GDP is relatively high in materially intensive industries such as primary industries such as mining, and many heavy processing industries such as metals and minerals processing, chemicals and cement. It can also be high in transport and agriculture.…”