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THE GREENHOUSE EFFECT AND EUROPEAN ECONOMIC GROWTH : A COMPARATIVE INPUT-OUTPUT STUDY FOR THE FEDERAL REPUBLIC OF GERMANY AND THE UNITED KINGDOM

Objective


The project studies how economic structural change has brought about increased atmospheric concentrations of carbon dioxide and how economic structural change may be used to reduce carbon dioxide emissions over the next 20 years. The principal analytical technique used was in input output analysis. This has the benefit that an economy can be studied in terms of many interacting productive sectors.

This study is prompted by the growing concern of the likely environmental impact of global warming, because of the increasing emission of carbon dioxide and other 'greenhouse' gases.

An outline is given of the history of carbon dioxide emissions. There is evidence that increasing atmospheric carbon dioxide concentrations increase the risk of major global climate change. The rate of increase of World carbon dioxide emissions is presently about 2% per annum which is down from 5% per annum in the early 1960s. Although this is an encouraging trend, it indicates the importance of adopting global policies to reduce, and reverse, this rate of increase of carbon dioxide emissions. The World energy/output ratio is falling at about 2% per annum, while the carbon dioxide/energy ratio is roughly constant. This is encouraging, indicating that global economic growth does not necessarily need to be sacrificed in thepursuit of reducing carbon dioxide emissions. For the European Community (EC) carbon dioxide emissions have been falling at about 2% per annum in recent years. This is twice the rate of reduction necessary to meet the modified Toronto target and in recent years the energy/output ratio has been falling at about 4% per annum, while the carbon dioxide/energy ratio has been relatively constant. This has been consistent with sustained growth in gross domestic product of about 2% per annum.

The project studies how economic structural change has brought about increased atmospheric concentrations of carbon dioxide and how economic structural change may be used to reduce carbon dioxide emissions over the next 20 years. The principal analytical technique used was in input output analysis. This has the benefit that an economy can be studied in terms of many interacting productive sectors.

This study is prompted by the growing concern of the likely environmental impact of global warming, because of the increasing emission of carbon dioxide and other 'greenhouse' gases.

An outline is given of the analysis of carbon dioxide emissions. German carbon dioxide emissions have been falling at about 1.5% per annum since the late 1970s. This can be attributed to a falling energy/output ratio and a falling carbon dioxide/energy ratio. At the same time, gross domestic product (GDP) growth of more than 2% per annum has been achieved. United Kingdom carbon dioxide emissions have also been falling, at about 1% per annum, since the late 1970s. This can be attributed to falling energy/output and carbon dioxide/energy ratios. This has allowed GDP growth of about 2% per annum to be maintained and carbon dioxide emissions attributable to fuel use in production have been falling in both countries. Also carbon dioxide emissions attributable directly to household fuel use have been approximately constant since the late 1970s, in both Germany and the United Kingdom.
For the United Kingdom there is evidence that, while most sectors are becoming more efficient in their use of energy, there is evidence of significant worsening energy efficiency in the transport sector and since 1981 in the United Kingdom, when the changing mix of producing sectors is taken into account, there has been an overall worsening in the efficiency of generating GDP from energy.
The observed structural changes, changes in carbon dioxide emissions overtime, and the results of scenario analyses, are very similar for Germany and the United Kingdom. Therefore, conclusions can be drawn for other industrialized countries;
For both Germany and the United Kingdom, the proportion of carbon dioxide emissions attributable directly to the domestic final demand for fuels has been increasing, from about 20% in 1968 to about 30% in 1988 and a large proportion of the direct plus indirect carbon dioxide emissions are attributable to mineral oil processing; electricity; chemical products.
When imports and exports are properly accounted for, both Germany and the United Kingdom are responsible for less carbon dioxide than they actually emit. For both countries, there is evidence that while there has been some improvement in the efficiency of energy use in production, there is less evidence for such efficiency improvements in the direct use of energy by households, government expenditure and investment and for both countries, there is evidence that the rise of the 'service' industries has led to a fall in total carbon dioxide emissions, but the German mix production is less carbon dioxide intensive than the United Kingdom mix.
The 'minimum disruption' approach can be taken to alterations in economic structure, to achieve target carbon dioxide emission reduction rates. This allows identification of those carbon dioxide reduction measures which give 'minimum disruption' to the economic structure, while still attaining target rates of, for example, GDP growth and employment growth.

The project studies how economic structural change has brought about increased atmospheric concentrations of carbon dioxide and how economic structural change may be used to reduce carbon dioxide emissions over the next 20 years. The principal analytical technique used was in input output analysis. This has the benefit that an economy can be studied in terms of many interacting productive sectors.

This study is prompted by the growing concern of the likely environmental impact of global warming, because of the increasing emission of carbon dioxide and other 'greenhouse' gases.

An outline is given of the scenario analysis for carbon dioxide emissions. In the absence of economic growth, the introduction of best practice technologies of energy use in production would lead to carbon dioxide emissions falling by about 1.4% per annum in both Germany and the United Kingdom. Best practice technologies in household energy use would lead to carbon dioxide emissions falling by about 0.6% per annum in both countries. Therefore the total rate of decrease of carbon dioxide emissions, with the introduction of best practice technology and in the absence of economic growth, would be 2% per annum.

The complete substitution of coal by gas in both countries would, in the absence of economic growth, lead to a 'once off' reduction in total carbon dioxide emissions by about 11%. The substitution of gas for coal only in electricity generation leads to a 'once off' reduction in carbon dioxide emissions by about 7 to 8% for both economies. These reductions of carbon dioxide emissions are, however, insufficient to meet the Toronto target.

Given an overall growth rate of gross domestic product (GDP) of 2% per annum with a higher growth rate in the services (4% per annum) and food (6% per annum) sectors, and a lower rate of growth in the remaining sectors, an improvement in efficiency of energy use by industry and households of about 2% per annum and a switch to renewable energy sou rces by about 1% per annum are sufficient to meet the Toronto target. This is true even with the phasing out of nuclear power.

From the application of the 'minimum disruption' approach to sieriario analyses, it seems that the necessary changes to meet the Toronto target for carbon dioxide emission reduction, for the production side of the economy, are close for those already being achieved. This is particularly true for fuel substitution. Also, the 'minimum disruption' changes in the structures of final demand compatible with reaching the Toronto target, maintaining GDP growth at 2% per annum, and maintaining full employment are demanding, but not too dissimilar from the historical trends observed.
One of the major problems facing the world today is the "global greenhouse" effect, with its threat of major and potentially catastrophic climatic disruption. This effect is caused principally by the emission of carbon dioxide (CO2) from the combustion of fossil fuels. The reduction of CO2 emission by the European Community may need to become a high priority in the coming years. However, this may have very detrimental effects on economic growth in the Community. This proposal is to study the economic determinants of the emission of CO2 in the Federal Republic of Germany and the United Kingdom, over the past 30 years, using an input-output approach. This would show how changes over time, and inter-country differences, can be attributed to the changing level and structure of final demand (gross domestic product), the pattern of inter-industry trading, and the technology of fossil fuel use in the various industrial sectors. This would form the basis for the generation of scenarios of future patterns of production, consumption and fuel use within the Community, allowing the investigation of how CO2 emission might be reduced, and of the corresponding impact on economic growth .

Funding Scheme

CSC - Cost-sharing contracts

Coordinator

UNIVERSITY OF KEELE
Address
Keele University
ST5 5BG Staffordshire
United Kingdom

Participants (1)

RUPRECHT-KARLS-UNIVERSITAET HEIDELBERG
Germany
Address
Seminarstrasse 2
69117 Heidelberg