Journal of Economic Structures

The Official Journal of the Pan-Pacific Association of Input-Output Studies (PAPAIOS)

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Open Access

Impacts of Growth of a Service Economy on CO2 Emissions: Japan’s Case

Journal of Economic StructuresThe Official Journal of the Pan-Pacific Association of Input-Output Studies (PAPAIOS)20132:8

https://doi.org/10.1186/2193-2409-2-8

Received: 30 April 2013

Accepted: 6 October 2013

Published: 17 October 2013

Abstract

The structural transition to a service economy has clearly contributed to decreasing direct (or territorial) greenhouse gas emissions. Nevertheless, the role of this structural transition on direct greenhouse gas emissions is not well understood quantitatively. This study applied the additive decomposition method and decomposed the change in CO2 emissions from domestic industries into five components: changes in the overall scale of the economy, changes in the industrial composition of the various economic sectors, energy intensity changes, changes in import composition, and changes in the import scale. The decomposition results show that during the 15-year period from 1990 to 2005, structural change effects under the domestic technology assumption (which include industrial composition effects, import scale effects, and import composition effects) totaled −35 Mt CO2, or 3 % of total CO2 emissions in 1990. It is concluded that the CO2 reduction due to the transition to a service economy was not negligible during 1990–2005 and that the structural transition to a service economy was much more important than the material dependence of service industries.

JEL Classification: O14, O44, Q56.

1 Introduction

Increased environmental loads can be understood as arising from a variety of economic factors. For example, the environmental Kuznets curve describes an inverted-U relationship between economic growth (including structural changes) and environmental pollution (Grossman and Krueger [1991, 1995, 1996]; Carson [2010] for a literature overview). In particular, this article sheds light on the relationship between structural changes and environmental load in a specific country. As in Levinson ([2009]), I will focus on influences on CO2 emissions. In this study, I consider not only the economic scale, but also another factor that exhibits significant influence: changes in industrial composition. In Japan, the percentage of domestic Japanese production attributable to secondary industries (manufacturing), which exhibit high rates of CO2 emissions per unit production (i.e., large direct emissions coefficients), fell drastically, from 49 % in 1990 to just 39 % in 2005. In contrast, the percentage of domestic Japanese production attributable to tertiary industries (service industries), which exhibit low coefficients of direct CO2 emissions, rose significantly, from 48 % in 1990 to 60 % in 2005.1 This also implies that Japan’s transition toward a service-oriented economy has contributed in reducing CO2 emissions, but the extent to which this has slowed the pace of global warming remains unclear.

Important studies on the relationship between the transition to a service economy and CO2 emissions include those of Suh ([2006]) and Nansai et al. ([2009]). Suh ([2006]) demonstrated that household consumption of services, excluding electric utilities and transportation services, accounts for 37.6 % of total industrial GHG emissions in the United States. Nansai et al. ([2009]) analyzed the factors governing life-cycle CO2 emissions in Japanese service industries between the years 1990 and 2000 and concluded that increased inputs of energy and resources (including materials and components) led to significantly increased CO2 emissions.

However, the studies of Suh ([2006]) and Nansai et al. ([2009]) did not quantify the transition to a service economy in terms of the increasing industrial composition attributable to service industries and also did not analyze the impact of the transition to a service economy on production-based CO2 emissions.2 In addition, their studies did not argue that the transition to a service economy spurs an increase in imports of CO2-intensive commodities and that consequently this structural change contributes to global warming. Therefore, in the present study, I apply the Shapley–Sun additive decomposition method (Shapley [1953]; Sun [1998]) and decompose the change in production-based CO2 emissions from domestic industries into five components: that due to changes in the overall scale of the economy, that due to changes in the industrial composition of the various economic sectors, that due to energy intensity (i.e., technical) changes, which measures CO2 emissions per unit of domestic production, that due to changes in the import composition of the various commodities, and that due to changes in the import scale. Using this index decomposition method, I will analyze the impact of Japan’s transition to a service economy on Japanese CO2 emissions between 1990 and 2005, and finally argue the environmental benefits of its structural transition.

The rest of this paper is organized as follows: Sect. 2 presents the decomposition method, Sect. 3 describes the data source, Sect. 4 presents a case study of Japan, and Sect. 5 concludes the paper.

2 Methodology

2.1 Estimating CO2 Emissions Originating from Industrial Activities

Let e k , i t denote the energy consumption (Gigajoules: GJ) of fuel type k ( k = 1 , 2 , , M ) associated with 1 unit (¥1 million) of production in industry sector i ( i = 1 , 2 , , N ) during year t. Here, N is the number of industry sectors and M is the number of types of fuel. Also, let c k denote the CO2 emissions (t CO2) generated directly from the consumption of 1 GJ worth of fuel type k in the specific industry sector. Then the quantity of CO2 emitted in conjunction with unit production in industry sector i in year t can be expressed in the form c k × e k , i t (t CO2/million yen).

If θ i t denotes the industrial composition showing the fraction of output of industry sector i of total production across all industries, and X d t denotes total industrial output summed over all industry sectors, the total amount of domestic production contributed by industry sector i in year t is then represented as θ i t × X d t (million yen).

Multiplying the CO2 emission coefficient of industry sector i, c k × e k , i t , by the domestic output of industry sector i, θ i t × X d t , yields c k e k , i t θ i t X d t as an estimate of CO2 emissions arising from the use of fuel type k in industry sector i. Summing these estimates over all industry sectors and all fuel types, we obtain the following estimate of total domestic production-based emissions Q d t (t CO2):
Q d t = i = 1 N k = 1 M c k e k , i t θ i t X d t
(1)

2.2 Changes in CO2 Emissions: Factor Decomposition

We now use the Shapley–Sun decomposition method to analyze changes in the quantity of CO2 emissions originating from industrial activities (i.e., the quantity Q d t ) into three sources: technical effects, industrial composition effects, and economic scale effects (Levinson [2009]). (For details on the decomposition method, see Ang [2004]; Ang et al. [2003]; Wood and Lenzen [2006] and see e.g., Ma and Stern [2008]; Kagawa et al. [2012] for the energy decomposition analysis.)

Let Δ Q d denote the change from year t to year t + 1 in CO2 emissions originating from industrial activities, expressed as follows:
Δ Q d = Q d t + 1 Q d t = i = 1 N k = 1 M c k e k , i t + 1 θ i t + 1 X d t + 1 i = 1 N k = 1 M c k e k , i t θ i t X d t = c E t + 1 θ t + 1 X d t + 1 c E t θ t X d t
(2)

Here, c is a ( 1 × M ) row vector whose k th element, c k , is the emission coefficient of fuel type k; E is an ( M × N ) matrix whose ( k , i ) element, e k , i , is the energy consumption (i.e., energy intensity) for fuel type k used to produce one unit of output in industry sector i; and θ is an ( N × 1 ) column vector whose i th element, θ i , is the industrial composition of industry sector i. The superscripts t and t + 1 indicate the year.

The changes in E = ( e k , i ) , θ = ( θ i ) , and X can be expressed as follows:
Δ E = E t + 1 E t
(3)
Δ θ = θ t + 1 θ t
(4)
Δ X d = X d t + 1 X d t
(5)
Using Eqs. (3), (4), and (5), Eq. (2) can be transformed as follows:
Δ Q d = c E t + 1 θ t + 1 X d t + 1 c E t θ t X d t = c ( E t + Δ E ) ( θ t + Δ θ ) ( X d t + Δ X d ) c E t θ t X d t + 1 = c Δ E θ t X d t + 1 + c E t Δ θ X d t + c E t θ t Δ X d + c Δ E Δ θ X d t + c E t Δ θ Δ X d + c Δ E θ t Δ X d + c Δ E Δ θ Δ X d
(6)

The first term on the right-hand side of Eq. (6) represents the influence on emissions of changes in the energy intensity in the industrial sector. The second and third terms represent the influence on emissions of changes in the industrial composition of the industrial sector and the total industrial output, respectively. The simplified additive decomposition method (e.g., Park [1992]) ignores second-order interaction terms (such as the fourth, fifth, and sixth terms on the right-hand side of Eq. (6)) and third-order interaction terms (such as the seventh term). As a result, the sum of the contributions of the first three terms on the right-hand side will not be equal to total change in emissions Δ Q d . The important question is how to treat the influence of the interaction terms (Sun [1998]).

In the present study, following Sun ([1998]), I consider the second-order interaction terms and the third-order interaction term, and employ the following additive decomposition formulation:
(7)

We refer to the first, second, and third terms on the right-hand side of Eq. (7) respectively as the technical effect, the industrial composition effect, and the economic scale effect, which we denote by Δ Q d Tech , Δ Q d Comp , and Δ Q d Scale . The effect expressed by Eq. (7) is the total effect, representing the sum of the effects across all industries; thus, for example, it is not possible to isolate from Eq. (7) the industrial composition effect in the service industry or the technical effect in the manufacturing industry. For this reason, we will further decompose Eq. (7) into the effect in each industry.

We will classify our N industry sectors into four industry groups:
  1. (1)

    primary industries,

     
  2. (2)

    secondary industries,

     
  3. (3)

    electricity, gas, and water supply industries, and

     
  4. (4)

    tertiary industries (service industries).

     
For industry sector i belonging to the group of primary industries (i.e., i primary industry ), we define S a to be the ( N × N ) diagonal matrix with i th diagonal element equal to 1 and all other elements equal to 0. Here, the subscript a indicates primary industries (i.e., agriculture, forestry, and fishery industries). The technical effect (i.e., that from changes in the energy intensity) in industry sectors belonging to the group of primary industries and the effect from changes in industrial composition in industry sectors belonging to the primary industries can be quantified using Eqs. (8) and (9) below:
Δ Q d , a Tech = c Δ E S a θ t X d t + 1 2 ( c Δ E S a Δ θ X d t + c Δ E S a θ t Δ X d ) + 1 3 c Δ E S a Δ θ Δ X d
(8)
Δ Q d , a Comp = c E t S a Δ θ X d t + 1 2 ( c Δ E S a Δ θ X d t + c E t S a Δ θ Δ X d ) + 1 3 c Δ E S a Δ θ Δ X d
(9)
Similarly, the technical effects and industrial composition effects in secondary industries, electricity, gas, and water supply industries, and tertiary industries can be estimated as in Eqs. (10) through (15) below:
Δ Q d , m Tech = c Δ E S m θ t X d t + 1 2 ( c Δ E S m Δ θ X d t + c Δ E S m θ t Δ X d ) + 1 3 c Δ E S m Δ θ Δ X d
(10)
Δ Q d , m Comp = c E t S m Δ θ X d t + 1 2 ( c Δ E S m Δ θ X d t + c E t S m Δ θ Δ X d ) + 1 3 c Δ E S m Δ θ Δ X d
(11)
Δ Q d , g Tech = c Δ E S g θ t X d t + 1 2 ( c Δ E S g Δ θ X d t + c Δ E S g θ t Δ X d ) + 1 3 c Δ E S g Δ θ Δ X d
(12)
Δ Q d , g Comp = c E t S g Δ θ X d t + 1 2 ( c Δ E S g Δ θ X d t + c E t S g Δ θ Δ X d ) + 1 3 c Δ E S g Δ θ Δ X d
(13)
Δ Q d , s Tech = c Δ E S s θ t X d t + 1 2 ( c Δ E S s Δ θ X d t + c Δ E S s θ t Δ X d ) + 1 3 c Δ E S s Δ θ Δ X d
(14)
Δ Q d , s Comp = c E t S s Δ θ X d t + 1 2 ( c Δ E S s Δ θ X d t + c E t S s Δ θ Δ X d ) + 1 3 c Δ E S s Δ θ Δ X d
(15)

Here, S m , S g , and S s , where the subscripts m, g, and s, respectively, denote secondary industries, electricity, gas, and water supply industries, and tertiary industries, are ( N × N ) diagonal matrices whose i th diagonal element is 1 for all i in the corresponding industry group and all other elements are zero.

3 Data

I used CO2 emissions data obtained from industrial tables contained in the Embodied Energy and Emission Intensity Data for Japan Using Input–Output Tables: 3EID data book released by the Center for Global Environmental Research at the National Institute for Environmental Studies of Japan (2012). In addition, I used the 1990–1995–2000–2005 linked environmental input–output tables (396 industry sectors) (Nansai et al. [2007, 2009]).

Using the 3EID data book allows energy intensity data for joules of 32 types of raw fuel directly consumed by producing one unit of output in each of 396 industry sectors in the years 1990, 1995, 2000, and 2005 (see Table 1 for the 32 raw fuel types). From this database, we can obtain values of e k , i t . In addition, from the same database, we can obtain data on the quantity c k (Table 1).
Table 1

The classification of fuel types

 

Fuel type

CO2 emission intensity

Unit

1

Coking coal

0.092

t CO2/GJ

2

Steam coal, lignite and anthracite

0.089

t CO2/GJ

3

Coke

0.108

t CO2/GJ

4

Blast furnace coke

0.108

t CO2/GJ

5

Coke oven gas (COG)

0.040

t CO2/GJ

6

BFG (Consumption)

0.108

t CO2/GJ

7

BFG (Generation)

0.108

t CO2/GJ

8

LOG (Consumption)

0.108

t CO2/GJ

9

LOG (Generation)

0.108

t CO2/GJ

10

Crude oil

0.069

t CO2/GJ

11

Fuel oil A

0.071

t CO2/GJ

12

Fuel oils B and C

0.071

t CO2/GJ

13

Kerosene

0.068

t CO2/GJ

14

Diesel oil

0.069

t CO2/GJ

15

Gasoline

0.067

t CO2/GJ

16

Jet fuel

0.067

t CO2/GJ

17

Naphtha

0.065

t CO2/GJ

18

Petroleum-based hydrocarbon gas

0.046

t CO2/GJ

19

Hydrocarbon oil

0.077

t CO2/GJ

20

Petroleum coke

0.093

t CO2/GJ

21

Liquefied petroleum gas (LPG)

0.060

t CO2/GJ

22

Natural gas, LNG

0.051

t CO2/GJ

23

Mains gas

0.052

t CO2/GJ

24

Black liquor

0.094

t CO2/GJ

25

Waste wood

0.077

t CO2/GJ

26

Waste tires

0.080

t CO2/GJ

27

Municipal waste

0.031

t CO2/GJ

28

Industrial waste

0.049

t CO2/GJ

29

Recycled plastic of packages origins

0.065

t CO2/GJ

30

Nuclear power generation

31

Hydro and other power generations

32

Limestone

0.0105

t CO2/GJ

Source: Embodied Energy and Emission Intensity Data for Japan Using Input–Output. Tables (3EID) data book released by the Center for Global Environmental Research at the National Institute for Environmental Studies of Japan (2012). The 3EID data are described with the unit of TOE (Tons of Oil Equivalent).

From the 1990–1995–2000–2005 linked input–output tables (which are evaluated in terms of 2005 producer prices), we can obtain not only data on the total production in each industry sector in each year, but also data on the quantity X d t . This, in turn, allows us to easily compute θ i , which measures the industrial composition of industry sector i. For details on the categorization of industry sectors, see Table 2.
Table 2

The categorization of industrial sectors

1

Rice

2

Wheat, barley and the like

3

Potatoes and sweet potatoes

4

Pulses

5

Vegetables

6

Fruits

7

Sugar crops

8

Crops for beverages

9

Other edible crops

10

Crops for feed and forage

11

Seeds and seedlings

12

Flowers and plants

13

Other inedible crops

14

Dairy cattle farming

15

Hen eggs

16

Fowl sand broilers

17

Hogs

18

Beef cattle

19

Other livestock

20

Veterinary service

21

Agricultural services (except veterinary service)

22

Silviculture

23

Logs

24

Special forest products (inc. hunting)

25

Marine fisheries

26

Marine culture

27

Inland water fisheries and culture

28

Metallic ores

29

Materials for ceramics

30

Gravel and quarrying

31

Crushed stones

32

Other non-metal lie ores

33

Coal mining, crude petroleum and natural gas

34

Slaughtering and meat processing

35

Processed meat products

36

Bottled or canned meat products

37

Dairy farm products

38

Frozen fish and shellfish

39

Salted, dried or smoked seafood

40

Bottled or canned seafood

41

Fish paste

42

Other processed seafood

43

Grain milling

44

Flour and other grain milled products

45

Noodles

46

Bread

47

Confectionery

48

Bottled or canned vegetables and fruits

49

Preserved agricultural foodstuffs (other than bottled or canned)

50

Sugar

51

Starch

52

Dextrose, syrup and isomerized sugar

53

Vegetable oils and meal

54

Animal oils and fats

55

Condiments and seasonings

56

Prepared frozen foods

57

Retort foods

58

Dishes, sushi and lunch boxes

59

School lunch (public)

60

School lunch (private)

61

Other foods

62

Refined sake

63

Beer

64

Whiskey and brandy

65

Other liquors

66

Tea and roasted coffee

67

Soft drinks

68

Manufactured ice

69

Animal feed

70

Organic fertilizers, n.e.c.

71

Tobacco

72

Fiber yarns

73

Cotton and staple fiber fabrics (inc. fabrics of synthetic spun fibers)

74

Silk and artificial silk fabrics (inc. fabrics of synthetic filament fibers)

75

Woolen fabrics, hemp fabrics and other fabrics

76

Knitting fabrics

77

Yarn and fabric dyeing and finishing (processing on commission only)

78

Ropes and nets

79

Carpets and floor mats

80

Fabricated textiles for medical use

81

Other fabricated textile products

82

Woven fabric apparel

83

Knitted apparel

84

Other wearing apparel and clothing accessories

85

Bedding

86

Other ready-made textile products

87

Timber

88

Plywood

89

Wooden chips

90

Other wooden products

91

Wooden furniture and fixtures

92

Wooden fixtures

93

Metallic furniture and fixture

94

Pulp

95

Paper

96

Paperboard

97

Corrugated cardboard

98

Coated paper and building (construction) paper

99

Corrugated card board boxes

100

Other paper containers

101

Paper textile for medical use

102

Other pulp, paper and processed paper products

103

Printing, plate making and book binding

104

Chemical fertilizer

105

Industrial soda chemicals

106

Inorganic pigment

107

Compressed gas and liquefied gas

108

Salt

109

Other industrial inorganic chemicals

110

Petrochemical basic products

111

Petrochemical aromatic products (except synthetic resin)

112

Aliphatic intermediates

113

Cyclic intermediates

114

Synthetic rubber

115

Methane derivatives

116

Oil and fat industrial chemicals

117

Plasticizers

118

Synthetic dyes

119

Other industrial organic chemicals

120

Thermo-setting resins

121

Thermoplastics resins

122

High function resins

123

Other resins

124

Rayon and acetate

125

Synthetic fibers

126

Medicaments

127

Soap, synthetic detergents and surface active agents

128

Cosmetics, toilet preparations and dentifrices

129

Paint and varnishes

130

Printing ink

131

Photographic sensitive materials

132

Agricultural chemicals

133

Gelatin and adhesives

134

Other final chemical products

135

Petroleum refinery products (inc. greases)

136

Coal products

137

Paving materials

138

Plastic products

139

Tires and inner tubes

140

Rubber footwear

141

Plastic footwear

142

Other rubber products

143

Leather footwear

144

Leather and fur skins

145

Miscellaneous leather products

146

Sheet glass and safety glass

147

Glass fiber and glass fiber products, n.e.c.

148

Other glass products

149

Cement

150

Ready mixed concrete

151

Cement products

152

Pottery, china and earthenware

153

Clay refractories

154

Other structural clay products

155

Carbon and graphite products

156

Abrasive

157

Miscellaneous ceramic, stone and clay products

158

Pig iron

159

Ferro alloys

160

Crude steel (converters)

161

Crude steel (electric furnaces)

162

Scrap iron

163

Hot rolled steel

164

Steel pipes and tubes

165

Cold-finished steel

166

Coated steel

167

Cast and forged steel

168

Cast iron pipes and tubes

169

Cast and forged materials (iron)

170

Iron and steel shearing and slitting

171

Other iron or steel products

172

Copper

173

Lead and zinc (inc. regenerated lead)

174

Aluminum (inc. regenerated aluminum)

175

Other non-ferrous metals

176

Non-ferrous metal scrap

177

Electric wires and cables

178

Optical fiber cables

179

Rolled and drawn copper and copper alloys

180

Rolled and drawn aluminum

181

Non-ferrous metal castings and forgings

182

Nuclear fuels

183

Other non-ferrous metal products

184

Metal products for construction

185

Metal products for architecture

186

Gas and oil appliances and heating and cooking apparatus

187

Bolts, nuts, rivets and springs

188

Metal containers, fabricated plate and sheet metal

189

Plumber’s supplies, powder metallurgy products and tools

190

Other metal products

191

Boilers

192

Turbines

193

Engines

194

Conveyors

195

Refrigerators and air conditioning apparatus

196

Pumps and compressors

197

Machinists’ precision tools

198

Other general industrial machinery and equipment

199

Machinery and equipment for construction and mining

200

Chemical machinery

201

Industrial robots

202

Metal machine tools

203

Metal processing machinery

204

Machinery for agricultural use

205

Textile machinery

206

Food processing machinery and equipment

207

Semiconductor making equipment

208

Other special machinery for industrial use

209

Metal molds

210

Bearings

211

Other general machines and parts

212

Copy machine

213

Other office machines

214

Machinery for service industry

215

Rotating electrical equipment

216

Transformers and reactors

217

Relay switches and switchboards

218

Wiring devices and supplies

219

Electrical equipment for internal combustion engines

220

Other electrical devices and parts

221

Applied electronic equipment

222

Electric measuring instruments

223

Electric bulbs

224

Electric lighting fixtures and apparatus

225

Batteries

226

Other electrical devices and parts

227

Household air-conditioners

228

Household electric appliances (except air-conditioners)

229

Video recording and playback equipment

230

Electric audio equipment

231

Radio and television sets

232

Wired communication equipment

233

Cellular phones

234

Radio communication equipment (except cellular phones)

235

Other communication equipment

236

Personal computers

237

Electronic computing equipment (except personal computers)

238

Electronic computing equipment (accessory equipment)

239

Semiconductor devices

240

Integrated circuits

241

Electron tubes

242

Liquid crystal element

243

Magnetic tapes and disks

244

Other electronic components

245

Passenger motor cars

246

Trucks, buses and other cars

247

Two-wheel motor vehicles

248

Motor vehicle bodies

249

Internal combustion engines for motor vehicles and parts

250

Motor vehicle parts and accessories

251

Steel ships

252

Ships (except steel ships)

253

Internal combustion engines for vessels

254

Repair of ships

255

Rolling stock

256

Repair of rolling stock

257

Aircrafts

258

Repair of aircrafts

259

Bicycles

260

Other transport equipment

261

Camera

262

Other photographic and optical instruments

263

Watches and clocks

264

Professional and scientific instruments

265

Analytical instruments, testing machine, measuring instruments

266

Medical instruments

267

Toys and games

268

Sporting and athletic goods

269

Musical instruments

270

Audio and video records, other information recording media

271

Stationery

272

Jewelry and adornments

273

“Tatami” (straw matting) and straw products

274

Ordnance

275

Miscellaneous manufacturing products

276

Residential construction (wooden)

277

Residential construction (non-wooden)

278

Non-residential construction (wooden)

279

Non-residential construction (non-wooden)

280

Repair of construction

281

Public construction of roads

282

Public construction of rivers, drainages and others

283

Agricultural public construction

284

Railway construction

285

Electric power facilities construction

286

Telecommunication facilities construction

287

Other civil engineering and construction

288

Electricity

289

On-site power generation

290

Gas supply

291

Steam and hot water supply

292

Water supply

293

Industrial water supply

294

Sewage disposal

295

Waste management services (public)

296

Waste management services (private)

297

Wholesale trade

298

Retail trade

299

Financial service

300

Life insurance

301

Non-life insurance

302

Real estate agencies and managers

303

Real estate rental service

304

House rent

305

Railway transport (passengers)

306

Railway transport (freight)

307

Bus transport service

308

Hired car and taxi transport

309

Road freight transport (except Self-transport by private cars)

310

Ocean transport

311

Coastal and inland water transport

312

Harbor transport service

313

Air transport

314

Consigned freight forwarding

315

Storage facility service

316

Packing service

317

Facility service for road transport

318

Port and water traffic control

319

Services relating to water transport

320

Airport and air traffic control (public)

321

Airport and air traffic control (industrial)

322

Services relating to air transport

323

Travel agency and other services relating to transport

324

Postal service

325

Fixed telecommunication

326

Mobile telecommunication

327

Other services relating to communication

328

Public broadcasting

329

Private broadcasting

330

Cable broadcasting

331

Information services

332

Internet based services

333

Image information production and distribution industry

334

Newspaper

335

Publication

336

News syndicates and private detective agencies

337

Public administration (central)

338

Public administration (local)

339

School education (public)

340

School education (private)

341

Social education (public)

342

Social education (private, non-profit)

343

Other educational and training institutions (public)

344

Other educational and training institutions (profit-making)

345

Research institutes for natural science (pubic)

346

Research institutes for cultural and social science (public)

347

Research institutes for natural sciences (private, non-profit)

348

Research institutes for cultural and social science (private, non-profit)

349

Research institutes for natural sciences (profit-making)

350

Research institutes for cultural and social science (profit-making)

351

Research and development (intra-enterprise)

352

Medical service (public)

353

Medical service (non-profit foundations, etc.)

354

Medical service (medical corporations, etc.)

355

Health and hygiene (public)

356

Health and hygiene (profit-making)

357

Social insurance (public)

358

Social insurance (private, non-profit)

359

Social welfare (public)

360

Social welfare (private, non-profit)

361

Social welfare (profit-making)

362

Nursing care (In-home)

363

Nursing care (In-facility)

364

Private non-profit institutions serving enterprises

365

Private non-profit institutions serving households, n.e.c.

366

Advertising services

367

Goods rental and leasing (except car rental)

368

Car rental and leasing

369

Repair of motor vehicles

370

Repair of machine

371

Building maintenance services

372

Judicial, financial and accounting services

373

Civil engineering and construction services

374

Worker dispatching services

375

Other business services

376

Movie theaters

377

Performances (except otherwise classified), theatrical companies

378

Amusement and recreation facilities

379

Stadiums and companies of bicycle, horse, motorcar and motorboat races

380

Sport facility service, public gardens and amusement parks

381

Other amusement and recreation services

382

General eating and drinking places (except coffee shops)

383

Coffee shops

384

Eating and drinking places for pleasures

385

Hotels

386

Cleaning

387

Barber shops

388

Beauty shops

389

Public baths

390

Other cleaning, barber shops, beauty shops and public baths

391

Photographic studios

392

Ceremonial occasions

393

Miscellaneous repairs, n.e.c.

394

Supplementary tutorial schools, instruction services for arts, culture and technical skills

395

Other personal services

396

Office supplies

Note: “Primary industry” includes sectors from #1 to #27. “Secondary industry” includes sectors from #28 to #287. “Tertiary industry” includes sectors from #297 to #396. “Electricity industry” includes sectors from #288 to #296.

4 Results

4.1 Macro-level Decomposition Results

According to the 1990–1995–2000–2005 linked input–output tables, Japan’s total industrial output was ¥841 trillion in 1990, ¥886 trillion in 1995, ¥922 trillion in 2000, and ¥962 trillion in 2005. Meanwhile, CO2 emissions originating from industrial activity were 1.04 billion t CO2 in 1990, 1.10 billion t CO2 in 1995, 1.13 billion t CO2 in 2000, and 1.17 billion t CO2 in 2005. The increase in CO2 emissions can be attributed to the growth in total industrial output. However, the CO2 intensity, which can be defined by dividing CO2 emissions originating from each year’s industrial activity by total industrial output, was 1.24 t CO2/million yen in 1990, 1.25 t CO2/million yen in 1995, 1.22 t CO2/million yen in 2000, and 1.22 t CO2/million yen in 2005. Thus, Japan’s CO2 intensity has been gradually improving, indicating that factors such as technological progress and the transition to cleaner fuels have contributed to reducing CO2 emissions.

Figure 1 shows the results of decompositions, using Eq. (7), of the changes in Japanese CO2 emissions originating from industrial activity over the 15-year period from 1990 to 2005, as decomposed into three factors: technical effects, industrial composition effects, and economic scale effects. Between 1990 and 1995, the change in CO2 emissions was +64 Mt CO2; from the figure, we see that this number breaks down into −2 Mt CO2 arising from technical effects, +8 Mt CO2 arising from industrial composition effects, and +58 Mt CO2 arising from economic scale effects. Next, between 1995 and 2000, the change in CO2 emissions was +25 Mt CO2; this number breaks down into −99 million t CO2 arising from technical effects, +78 Mt CO2 arising from industrial composition effects, and +46 Mt CO2 arising from economic scale effects. Finally, between 2000 and 2005, the change in CO2 emissions was +46 Mt CO2; this number breaks down into +98 Mt CO2 arising from technical effects, −102 Mt CO2 arising from industrial composition effects, and +50 Mt CO2 arising from economic scale effects.
Fig. 1

CO2 decomposition result using the Shapley–Sun decomposition method (units: Mt CO2)

Thus, we see that, during the 10-year period from 1990 to 2000, economic scale effects and industrial composition effects both contributed to increasing CO2 emissions, while technical effects contributed to reducing CO2 emissions. However, this trend reversed itself in the years between 2000 and 2005, during which technical effects contributed significantly to increasing CO2 emissions, whereas industrial composition effects contributed significantly to reducing CO2 emissions.

Because the results presented in Fig. 1 are aggregate totals over all industry sectors, they do not allow us to identify the particular industry sectors in which technical effects and industrial composition effects influenced CO2 emissions. To investigate these questions, we use Eqs. (8) through (15) to analyze technical effects and industrial composition effects in each of our four industry groups: primary industries, secondary industries, electricity, gas, and water supply industries, and tertiary industries.

4.2 Technical Effects for the Four Industry Groups

Within each industry, the technical effect measures the impact on CO2 emissions of changes in the industrial energy intensity. A negative technical effect for an industry signifies that the industry has successfully reduced energy consumption or shifted its use of energy in a way that reduces CO2 emissions. Figure 2 shows technical effects for the four industry groups considered in this study. As shown, electricity, gas, and water supply industries exhibited a negative technical effect throughout the 10-year period from 1990 to 2000 but crossed over to a large positive technical effect (+102 Mt CO2) during the interval between 2000 and 2005.
Fig. 2

Technical effects for the four industry groups (units: Mt CO2)

Thus, we see that, in the past 15 years, the technical effects in electricity, gas, and water supply industries have varied widely. In particular, one factor contributing to the increase in emissions during the 5-year period from 2000 to 2005 was the high technical effect of +62 Mt CO2 observed for the commercial electric power sector. The primary cause of this phenomenon in the commercial electric power sector is the fact that, although the energy intensity for crude oil decreased during this period, the energy intensity for coal, lignite, and anthracite increased, and an energy shift to these fuels, which exhibit relatively higher concentrations of CO2 emissions, has occurred.

Figure 2 also reveals that technical effects in tertiary industries led to a significant decrease in CO2 emissions between the years 2000 and 2005. Considering the technical effects in specific sectors, we see that the technical effect in the ocean cargo transport industry was −8 Mt CO2 and that in the road cargo transport industry was −7 Mt CO2. Improved fuel efficiency in both these sectors significantly reduced the quantity of heavy oil needed to power ships and the quantity of light oil needed to power trucks, accounting for 88 % of the technical effects observed in tertiary industries.

4.3 Industrial Composition Effects for the Four Industry Groups

Within each industry, the industrial composition effect measures the impact of changes in the fraction of the overall industry accounted for by the various sectors. A negative value for this effect indicates that an industry sector contributed to reducing CO2 emissions by decreasing the industrial composition. Figure 3 displays industrial composition effects for the four industry groups. As indicated in the figure, both primary and secondary industries exhibited negative industrial composition effects throughout the 15-year period from 1990 to 2005, whereas tertiary industries exhibited an overall positive effect throughout this period.
Fig. 3

Industrial composition effects for the four industry groups (units: Mt CO2)

The total industrial composition effect for primary, secondary, and tertiary industries was −18.8 Mt CO2 between 1990 and 1995, −15.8 Mt CO2 between 1995 and 2000, and −30.4 Mt CO2 between 2000 and 2005. These observations indicate that, throughout this 15-year period, the market for primary and secondary industries contracted, whereas the market for tertiary industries expanded (indicating the transition to a service economy); these changes consequently reduced CO2 emissions by 65 Mt CO2.

4.4 Role of the Service Economy and International Trade on CO2 Emissions

Figure 4 compares the total technical effect for primary, secondary, and tertiary industries to the total industrial composition effect for these three industry groups.3 Considering the overall effect (that is, the sum of the technical effect and the industrial composition effect), we see that, in the years between 1990 and 1995, technical effects and industrial composition effects together accounted for an increase in CO2 emissions of 880 kt CO2 (the sum of the technical effect and the industrial composition effect for 1990–1995 shown in Fig. 4). On the other hand, between 1995 and 2000, technical effects and industrial composition effects led to a decrease in CO2 emissions of 50.7 Mt CO2, and between 2000 and 2005 these effects led to a further decrease of 34.2 Mt CO2. Thus, the overall decrease was particularly significant between 1995 and 2000; from the figure, we can see that this is largely attributable to the relatively large technical effects exhibited by tertiary industries during this interval.
Fig. 4

Overall effects for three industry groups (units: Mt CO2)

The 1990–1995 overall effect of +880 kt CO2 corresponds to 0.1 % of total emissions in 1990, which is the base year of the Kyoto Protocol. Whereas the industrial composition effect during this period was a large negative effect due to the transition to a service economy, the technical effect contributed significantly to increased CO2 emissions. Between 1995 and 2000, the overall effect was −50.7 Mt CO2, corresponding to 4.6 % of total emissions in 1995; between 2000 and 2005, the overall effect was −34.2 Mt CO2, or a 3 % decrease compared to total emissions in 2000. Nansai et al. ([2009]) analyzed the domestic CO2 emissions associated with the energy and material goods absorbed by services through the supply chain during the decade 1990–2000. They found that the CO2 emissions contributed by way of the material goods absorbed by service industries rose from 68 Mt CO2 in 1990 to 87 Mt CO2 in 2000. As a result, the material dependence of service industries increased by 19 Mt CO2 during 1990–2000. On the other hand, this study found that the CO2 reduction due to the transition of a service economy was 35 Mt CO2.4 This reveals that the structural transition to a service economy was much more important than the material dependence of service industries.

Over the past 15 years, the declining share of domestic output by Japan’s manufacturing industries has contributed to the mitigation of global warming, but the corresponding increase in the share of manufactured goods imported from overseas has increased CO2 emissions in foreign countries. This leads to the question of whether it is possible that the net impact has been to exacerbate the phenomenon of global warming. To address this question, we considered the impact on CO2 emissions of the changing share of imports; we decomposed import-based CO2 emissions into three sources, as formulated in the Appendix.5 Figures 5 and 6 present the results of this decomposition analysis. As shown in Fig. 5, over the past 15 years, the absolute quantity of imports from foreign countries to Japan rose and at the same time domestic CO2 emissions rose by the equivalent of 38 Mt CO2 (the total import scale effect). In contrast, as shown in Fig. 6, changes in the import composition decreased domestic CO2 emissions by 8 Mt CO2. These results demonstrate that Japan’s increasing dependence on imports during the past 15 years has accelerated global warming.
Fig. 5

Import scale effects for three industry groups (units: Mt CO2)

Fig. 6

Import composition effects for three industry groups (units: Mt CO2)

In this study, we have employed the domestic technology assumption to estimate import-based CO2 emissions by multiplying Japanese import volumes by Japanese CO2 emission coefficients for each of 396 industries. For this reason, we might have underestimated CO2 emissions due to imports from developing countries with relatively high emission coefficients. As the Japanese economy transitions from agricultural and manufacturing industries to service-based industries, it depends increasingly on imports of agricultural products and manufactured goods; on the basis of the domestic technology assumption, these imports changes (especially, the increase in the import scale of manufacturing products) and the previous industrial composition changes (i.e., the transition to a service economy) have consequently brought about a reduction in production-based CO2 emissions of 35 Mt CO2, or approximately 3 % of total emissions in 1990.

However, this reduction effect may be considerably overestimated due to differences in CO2 emission intensities between Japan and other countries. Based on the World Input–Output Database (40 countries and 35 industrial sectors),6 the Japanese industrial CO2 intensities are approximately half those of China (one of the more CO2-intensive countries) on average. Although the Chinese CO2 emission intensities from the World Input–Output Database cannot be easily used for our study due to the highly aggregated sectoral classifications, it is clear that if we simply assume all the Japanese CO2 intensities for a particular year (1990, 1995, 2000, and 2005) to be double their actual values, both the import scale effect and the import composition effect would be also double, accounting for 76 Mt CO2 and −16 Mt CO2, respectively. As a result, this assumption leads to the findings that the imports change effect, including their scale and composition effects, is 60 Mt CO2 and the reduction effect due to the industrial composition changes over the entire 15-year period was offset by the imports change effect (see Sect. 4.3 for the industrial composition effects). Thus, the CO2 emission leakage of Japan might not be negligible.

Under the terms of the Kyoto Protocol, Japan’s target was to reduce domestic emissions by 6 % of total emissions in 1990; thus, if we consider only the domestic industrial composition effect (−65 Mt CO2) discussed in Sect. 4.3, then we must conclude that this structural transition has contributed significantly to Japan’s attainment of its emissions-reduction goals under the Kyoto Protocol. Moreover, the CO2 emissions tax under consideration by Japan’s Ministry of the Environment is 289 yen/t CO2, and, based on this tax rate, the environmental benefit of the transition to a service economy will amount to ¥18.7 billion ( = 289 yen / t CO 2 × 65 Mt CO 2 ). Thus, we cannot ignore these structural change effects when considering the mitigation of domestic greenhouse gas emissions. Industrial policies that accelerate Japan’s transition to a service economy are an effective means of reducing Japanese domestic CO2 emissions. However, such policies may result in increased emissions overall, by steering the production of manufactured industrial goods to foreign producers exhibiting high concentrations of CO2 emissions. The important point is to strive for the dematerialization of society as a whole, thereby reducing CO2 emissions from manufacturing sectors both in Japan and abroad.

5 Conclusions

In this study, I considered the Japanese economy during three time periods, from 1990 to 1995, from 1995 to 2000, and from 2000 to 2005, and I decomposed changes in CO2 emissions originating from detailed industrial activities into five contributing factors, technical effects, industrial composition effects, economic scale effects, import scale effects, and import composition effects.

The major findings of this study are as follows.
  1. (1)

    During the 15-year period from 1990 to 2005, technical effects in the ocean and road cargo transport sectors (including, among other factors, increased fuel efficiency for ships and trucks) helped to ensure an overall technical effect of −29 Mt CO2 for tertiary industries as a whole, thus contributing significantly to a reduction in CO2 emissions.

     
  2. (2)

    The industrial composition changes during the period from 2000 to 2005 contributed to a decrease in CO2 emissions, while those changes during the 10-year period from 1990 to 2000 led to an increase in CO2 emissions. The main reason is that the Japanese economy experienced a significant decarbonization due to structural changes toward a service economy during 2000 to 2005.

     
  3. (3)

    During the 15-year period from 1990 to 2005, structural change effects under the domestic technology assumption (which include industrial composition effects, import scale effects, and import composition effects) totaled −35 Mt CO2, or 3 % of total CO2 emissions in 1990. These effects were instrumental in allowing Japan to attain its emissions-reduction target under the Kyoto Protocol, which was a 6 % reduction from 1990 emissions levels.

     
  4. (4)

    I demonstrated that the domestic environmental benefit arising from the transition to a service economy would amount to ¥18.7 billion.

     

Appendix

Using the same decomposition as in Eq. (7), the decomposition formula regarding the CO2 emissions induced by imports can be obtained as

where π is an ( N × 1 ) column vector whose i th element, π i , is the import composition of imported commodity i, and X m is the total amount of imports to Japan.

Author’s Contributions

SO proposed the SDA method, conducted data analysis, and provided policy implications.

Footnotes
1

I estimated the industrial composition rates using the linked input–output tables during 1990–2005 (see Ministry of Internal Affairs and Communication of Japan, 2010, for the linked input–output tables).

 
2

Production-based CO2 emissions represent CO2 emissions from the production activities of domestic industries.

 
3

Figures 2 and 3 show that the technical effects and industrial composition effects of electricity, gas, and water supply industries were large during the study period. In this section, I would like to discuss how the structural changes affected the CO2 emissions when excluding these effects of electricity, gas, and water supply industries.

 
4

The CO2 reduction effect due to the transition to a service economy during 1990–2000 was estimated by summing total industrial composition effects during 1990–1995 and 1995–2000 (see Fig. 4).

 
5

The import-based CO2 emissions represent CO2 emitted by producing imported goods and services overseas.

 
6

The WIOD is downloadable from the website: http://www.wiod.org/ (Dietzenbacher et al. [2013]).

 

Declarations

Acknowledgements

An early version of this paper was prepared for The International Input–Output Association: The 20th International Input–Output Conference, Bratislava, Slovakia, 25–29 June 2012. I wish to express my gratitude for discussions with Shigemi Kagawa (Kyushu University) and Keisuke Nansai (Center for Material Cycles and Waste Management Research, National Institute for Environmental Studies in Japan). I also appreciate several helpful comments from Manfred Lenzen (the University of Sydney).

Authors’ Affiliations

(1)
Faculty of Economics, Kyushu University

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Copyright

© S. Okamoto; licensee Springer. 2013

This article is published under license to BioMed Central Ltd. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/2.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.