One man's carbon is another man's bread: understanding differences in the structure of carbon emissions

The indicators also point out how countries differ in fundamental ways. Finland and Canada have more than five times as many heating degree-days as Australia, and two-and-a-half times as many as Japan. Surely this kind of difference must be taken into account in accounting for differences in emissions. Australia is blessed with low-cost coal and bauxite, which leads to high carbon emissions for primary aluminium production. Australia, the US, and Sweden have more than two times the ratio of domestic freight tonne-km to GDP than most European countries and Japan. This leads to higher emissions from road, rail, and inland shipping. Americans have the largest homes, which raises emissions from space heating. Are these structural differences rigidly fixed in a way that will always make some countries high emitters? Decomposition using indicators raises such questions, but unfortunately cannot answer them.

C. Why Only Intensities? What about Structure?

Clearly, overall sustainability depends on reducing overall externalities from economic and human activity, particularly those that will affect future generations, such as carbon emissions. But few authorities have advocated reducing overall economic activity as a way of reducing those externalities. Instead, the primary focus has been on reducing the amount of an externality per unit of activity, that is, on reducing its intensity. Hence we find that the intensities convey useful information because they measure the link between emissions and activity. We call the goal of reducing the intensity of a particular externality "flexing the link".

At the same time we are aware of the vital role that the overall scale of an economy and its structure together play in determining the level of carbon emissions. A tendency to focus only on normalised indicators hides an important part of the development process. Lower-income countries are growing rapidly, usually much too fast for improved energy efficiency and fuel switching to offset the rise in carbon emissions. Compounding this problem is that such growth often fires increases in home and transportation-related energy uses, which are carbon-intensive. This spurt of activity might even increase the ratio of emissions to GDP, which gives a misleading impression of the development that is really occurring. Only with a careful, disaggregated approach can these natural pauses in the long-term decarbonisation of an economy be explained.

IV. Policy Implications for IEA Countries: You Cannot Hide from Indicators

One important though sometimes discomforting benefit of a disaggregated approach to measuring energy use is that the analyst can see developments invisible at the aggregate level. If restraining carbon emissions from fossil fuel use is important to sustainability, then it is important to know whether technologies actually work; whether raising fuel prices work; whether non-price policies work. It is very hard to say how these kinds of stimuli affect energy use or emissions. But without knowing how energy or emissions levels have changed, the arguments about "why" are meaningless.

Driving Forces: Pointing the Way to What Matters

Displaying indicators in novel ways reveals the importance of certain causal factors. For example, showing the carbon emissions from freight sectors of six IEA countries against each country’s respective GDP in material industry reminds us to take into account the strength of the historical coupling (in this case, freight levels vs. GDP) in thinking about changes in the future. And it reminds us that, all else being equal, emissions from freight are likely to rise with GDP. The economy will not stand still while we devise ways of lowering emissions.

Why are these such important pieces of the puzzle? The answer is that reducing carbon emissions, relative to GDP or even in an absolute sense, depends on the kinds of changes described above continuing for many years or decades. Understanding how prices and incomes shape emissions is also a step to solving the puzzle. Monitoring those changes, and adjusting the stimuli when the reduction in emissions slows, will be important. The IEA approach, using indicators, provides important lighting to make this task a bit easier.

V. Separating the Meat from the Carbon: Indicators on the Road from Buenos Aires

Energy and carbon indicators are nothing but tools to disaggregate and measure the link between emissions, the economy, and human activity. This is the only way to understand how carbon can be shed from the meat in any growing economy with minimum or no economic loss. Unfortunately, there is very little real agreement on what to measure and how to measure it today. There is no mechanism, for example, for "adjusting" emissions for a very cold or warm year. And there are few negotiators or their advisors able to make comparisons of differences in emissions patterns as the basis for differentiated emissions-reductions targets. The main reason is not lack of data per se, although this is an enormous problem for most developing countries. Rather, the real hindrance is belated recognition of the importance of transparency of the energy-economy-carbon links. Aggregation may reduce errors, but it also blinds observers and negotiators alike to the differences between the meat and the carbon. Thus there is an urgent need to be able make this distinction, made even more urgent as negotiations over carbon reductions become more binding and the year 2010 approaches. Whether supported by governments, by multilateral agencies like the World Bank, the FCCC or IEA, or other recognized and neutral international organisations, data collection and analysis, expert training, and a consensus-building process are the key steps to separating the meat from the carbon.

Note! The opinions expressed in this paper are those of the authors and NOT the International Energy Agency.