Statistical techniques for exploring trends in emissions and energy consumption in developed and developing countries

Mr Robin Smale, Vivid Economics

Robin Smale, Vivid Economics

Thomas Kansy, Vivid Economics

This paper applies statistical techniques and discovers key drivers in electricity demand and emissions intensity, demonstrating best practice in decomposition analysis. The paper is a foundation for the carbon budgeting of the Australian Climate Change Authority, published in February 2014. Australia is the focus, alongside results for other developed and developing countries, showing the flexibility of the approach and its suitability for probing a wide range of questions of relevance to energy and emissions analysis.

Decomposition analysis breaks down the total change in an aggregate series of energy consumption or emissions production over a period of time, revealing the underlying drivers and quantifying the contribution of each.

The researcher can choose relatively freely the components of decomposition, to suit his or her investigation of specific issues. For example, changes in the emissions-intensity of electricity generation can be broken down into:

–           fossil fuel mix: shifts between different fossil fuels due to, for instance, increased substitution of gas for black coal;

–           renewable share: increased renewable electricity generation in the overall generation mix;

–           carbon intensity: emissions intensity within each fossil fuel type has changed due to, for instance, increases in fuel quality; and

–           fuel efficiency: efficiency of transforming fuel into power due to, for instance, better technology or increased utilisation of power plants.

Australia offers a striking example. Since 2008, electricity consumption in the National Electricity Market has been in decline, electricity generation emissions intensity has improved, and economy-wide emissions have fallen rapidly (including land use and land-use change). Through decomposition, the paper establishes the relative importance of the drivers underlying these changes.

The analysis shows that the recent fall in electricity consumption in the National Electricity Market was the consequence of falling activity in the manufacturing sector, offset by consumption increases in the residential and commercial and services sectors. Gas-fired and renewable electricity generation were the major drivers of the reduction in emissions intensity of electricity generation between 2008 and 2011, contributing approximately 80 per cent of the decline. Improvements in the carbon intensity within fuel types contributed the remaining share of the reduction, whereas changes in fuel efficiency have had virtually no impact. Decreases in emissions from land use and land-use change, in particular forestry, offset emissions from economic growth in other parts of the economy between 2008 and 2011.

These results contrast with growth in power demand and emissions in developing countries, where the analysis reveals different patterns of change in intensity, structure of demand and fuel mix.

Keywords: greenhouse gas emissions, carbon intensity of electricity, electricity demand, structural decomposition analysis