Identifying the sources of structural changes in CO2 emissions in Italy

Decomposition analysis represents an important tool in order to highlight the implication of socio-economic, employment and environmental indicators. In addition, it also helps to assess the determinants which are responsible for changes in such indicators. In this paper, changes in CO2 emissions in Italy are examined on the basis of the combination of singular value decomposition (SVD) analysis and structural decomposition analysis (SDA). SVD is used to decompose the total environmental pollution impact coefficient matrix and the pollution multiplier matrix in three different factors: key structures of the policy objective, key structures of the policy control and singular values to find out the potential behaviour of the economy. Furthermore, SDA is carried out to classify the CO2 emission into four main determinants over a period of fourteen years i.e. from 1995 to 2009. These four determinants include: the policy objective effects, the policy control effects, the singular values effects and the final demand structure effects. The results point out that the CO2 emissions decreased during the overall period of 1995–2009, the only exception to this was the period 1995–2000 in which the CO2 emissions increased to 0.29% and technological change was a positive contributor to the increase of carbon emission during this period. Structural decomposition suggests that CO2 increases with an increase in the final demand, implying that a reduction in CO2 emissions is possible only if the increase in demand is based on renewable energies or if economic growth is sustainable.