Investigating the Relationship between Economic Activity and Energy Intensity of Low- to High-Income Countries using Spatial Decomposition

Abstract

Drivers to CO2 emissions are well-studied in literature. However, previous studies had focused mostly on individual countries or regions, and low to middle income countries are seldom investigated on. In this present work, the contributions of drivers to CO2 emissions, particularly economic activity and energy intensity, of 195 countries grouped by income level are calculated and compared using the spatial logarithmic mean Divisia index (LMDI) method. As different countries belong to various income levels, they can be assumed to represent the future of other countries. Thus, the analysis can produce useful insights to guide the strategic planning of developing countries. Results show that countries generally tend to reduce their energy intensity as their economic activity increases, and this is evident across all income levels. Moreover, outliers such as China, Japan and the United States are seen from the data, and their unique characteristics are explored. Most interestingly, it is observed that the opportunity to decrease energy intensity decreases as the income levels rise, and this is most challenging for the lower-middle income countries. The results of this study suggest that the lower-middle income countries would mostly require international support to meet their climate change mitigation targets, and this would require further investigation and validation from other researchers.