IDEAS home Printed from https://ideas.repec.org/p/hhs/gunwpe/0213.html
   My bibliography  Save this paper

Putting decomposition of energy use and pollution on a firm footing - clarifications on the residual, zero and negative values and strategies to assess the performance of decomposition methods

Author

Listed:
  • Muller, Adrian

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

I show how the problems with zero and negative values in decomposition can in principle be resolved by avoiding ill-defined mathematical operations used to derive the decomposition formulae (division by zero and taking logarithms of zero and negative values). Referring to integral approximation, which is the basis of any decomposition analysis, I also discuss the residual in decomposition and show that the presence of a non-zero residual is natural and that requiring a zero residual as a strategy to identify optimal decomposition methods is without basis. To nevertheless advise on optimal decomposition methods, I suggest to investigate for which types of functions different decomposition methods are exact or good approximations and how they perform in simulations, where the exact integrals are known. Regarding these criteria the LMDI seems to perform best.

Suggested Citation

  • Muller, Adrian, 2006. "Putting decomposition of energy use and pollution on a firm footing - clarifications on the residual, zero and negative values and strategies to assess the performance of decomposition methods," Working Papers in Economics 213, University of Gothenburg, Department of Economics, revised 10 Aug 2007.
    • Handle: RePEc:hhs:gunwpe:0213
    Note: WP 215 is now a revised version of bort WP 213 and WP 215.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/2077/2702
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ang, B. W., 2004. "Decomposition analysis for policymaking in energy:: which is the preferred method?," Energy Policy, Elsevier, vol. 32(9), pages 1131-1139, June.
    2. Trivedi, P K, 1981. "Some Discrete Approximations to Divisia Integral Indices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(1), pages 71-77, February.
    3. Ang, B.W., 1995. "Decomposition methodology in industrial energy demand analysis," Energy, Elsevier, vol. 20(11), pages 1081-1095.
    4. B. W. Ang & Ki-Hong Choi, 1997. "Decomposition of Aggregate Energy and Gas Emission Intensities for Industry: A Refined Divisia Index Method," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 59-73.
    5. Sun, J. W., 1998. "Changes in energy consumption and energy intensity: A complete decomposition model," Energy Economics, Elsevier, vol. 20(1), pages 85-100, February.
    6. Chung, Hyun-Sik & Rhee, Hae-Chun, 2001. "A residual-free decomposition of the sources of carbon dioxide emissions: a case of the Korean industries," Energy, Elsevier, vol. 26(1), pages 15-30.
    7. Muller, Adrian, 2006. "Putting decomposition of energy use and pollution on a firm footing - clarifications on the residual, zero and negative values and strategies to assess the performance of decomposition methods," Working Papers in Economics 213, University of Gothenburg, Department of Economics, revised 10 Aug 2007.
    8. Ang, B.W. & Liu, F.L., 2001. "A new energy decomposition method: perfect in decomposition and consistent in aggregation," Energy, Elsevier, vol. 26(6), pages 537-548.
    9. Boyd, Gale A. & Hanson, Donald A. & Sterner, Thomas, 1988. "Decomposition of changes in energy intensity : A comparison of the Divisia index and other methods," Energy Economics, Elsevier, vol. 10(4), pages 309-312, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Muller, Adrian, 2006. "Clarifying Poverty Decomposition," Working Papers in Economics 217, University of Gothenburg, Department of Economics, revised 17 Nov 2008.
    2. Åsa Löfgren & Adrian Muller, 2010. "Swedish CO 2 Emissions 1993–2006: An Application of Decomposition Analysis and Some Methodological Insights," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(2), pages 221-239, October.
    3. Monjon, Stéphanie & Quirion, Philippe, 2011. "Addressing leakage in the EU ETS: Border adjustment or output-based allocation?," Ecological Economics, Elsevier, vol. 70(11), pages 1957-1971, September.
    4. Quentin Perrier & Philippe Quirion, 2017. "La transition énergétique est-elle favorable aux branches à fort contenu en emploi ? Une analyse input-output pour la France," Revue d'économie politique, Dalloz, vol. 127(5), pages 851-887.
    5. Quentin Perrier & Philippe Quirion, 2016. "La transition énergétique est-elle favorable aux branches à fort contenu en emploi ? Une approche input-output pour la France," Policy Papers 2016.02, FAERE - French Association of Environmental and Resource Economists.
    6. Mohlin, Kristina & Camuzeaux, Jonathan R. & Muller, Adrian & Schneider, Marius & Wagner, Gernot, 2018. "Factoring in the forgotten role of renewables in CO2 emission trends using decomposition analysis," Energy Policy, Elsevier, vol. 116(C), pages 290-296.
    7. Carlino, Laurent & Coppens, François & González, Javier & Ortega, Manuel & Pérez-Duarte, Sébastien & Rubbrecht, Ilse & Vennix, Saskia, 2017. "Decomposition techniques for financial ratios of European non-financial listed groups," Statistics Paper Series 21, European Central Bank.
    8. Muller, Adrian, 2006. "Putting decomposition of energy use and pollution on a firm footing - clarifications on the residual, zero and negative values and strategies to assess the performance of decomposition methods," Working Papers in Economics 215, University of Gothenburg, Department of Economics, revised 10 Aug 2007.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fernández González, P. & Landajo, M. & Presno, M.J., 2014. "Tracking European Union CO2 emissions through LMDI (logarithmic-mean Divisia index) decomposition. The activity revaluation approach," Energy, Elsevier, vol. 73(C), pages 741-750.
    2. Lenzen, Manfred, 2006. "Decomposition analysis and the mean-rate-of-change index," Applied Energy, Elsevier, vol. 83(3), pages 185-198, March.
    3. Fernández, Esteban & Fernández, Paula, 2008. "An extension to Sun's decomposition methodology: The Path Based approach," Energy Economics, Elsevier, vol. 30(3), pages 1020-1036, May.
    4. Fernández González, P., 2015. "Exploring energy efficiency in several European countries. An attribution analysis of the Divisia structural change index," Applied Energy, Elsevier, vol. 137(C), pages 364-374.
    5. Fernández González, P. & Presno, M.J. & Landajo, M., 2015. "Regional and sectoral attribution to percentage changes in the European Divisia carbonization index," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 1437-1452.
    6. Su, Bin & Ang, B.W., 2012. "Structural decomposition analysis applied to energy and emissions: Some methodological developments," Energy Economics, Elsevier, vol. 34(1), pages 177-188.
    7. Carlino, Laurent & Coppens, François & González, Javier & Ortega, Manuel & Pérez-Duarte, Sébastien & Rubbrecht, Ilse & Vennix, Saskia, 2017. "Decomposition techniques for financial ratios of European non-financial listed groups," Statistics Paper Series 21, European Central Bank.
    8. Fernández González, P. & Landajo, M. & Presno, M.J., 2013. "The Divisia real energy intensity indices: Evolution and attribution of percent changes in 20 European countries from 1995 to 2010," Energy, Elsevier, vol. 58(C), pages 340-349.
    9. de Freitas, Luciano Charlita & Kaneko, Shinji, 2011. "Decomposition of CO2 emissions change from energy consumption in Brazil: Challenges and policy implications," Energy Policy, Elsevier, vol. 39(3), pages 1495-1504, March.
    10. Md. Afzal Hossain & Jean Engo & Songsheng Chen, 2021. "The main factors behind Cameroon’s CO2 emissions before, during and after the economic crisis of the 1980s," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(3), pages 4500-4520, March.
    11. Muller, Adrian, 2006. "Clarifying Poverty Decomposition," Working Papers in Economics 217, University of Gothenburg, Department of Economics, revised 17 Nov 2008.
    12. Vaninsky, Alexander, 2014. "Factorial decomposition of CO2 emissions: A generalized Divisia index approach," Energy Economics, Elsevier, vol. 45(C), pages 389-400.
    13. Åsa Löfgren & Adrian Muller, 2010. "Swedish CO 2 Emissions 1993–2006: An Application of Decomposition Analysis and Some Methodological Insights," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(2), pages 221-239, October.
    14. Cahill, Caiman J. & Ó Gallachóir, Brian P., 2012. "Combining physical and economic output data to analyse energy and CO2 emissions trends in industry," Energy Policy, Elsevier, vol. 49(C), pages 422-429.
    15. Patiño, Lourdes Isabel & Alcántara, Vicent & Padilla, Emilio, 2021. "Driving forces of CO2 emissions and energy intensity in Colombia," Energy Policy, Elsevier, vol. 151(C).
    16. Jeong, Kyonghwa & Kim, Suyi, 2013. "LMDI decomposition analysis of greenhouse gas emissions in the Korean manufacturing sector," Energy Policy, Elsevier, vol. 62(C), pages 1245-1253.
    17. Wang, H. & Ang, B.W. & Su, Bin, 2017. "Assessing drivers of economy-wide energy use and emissions: IDA versus SDA," Energy Policy, Elsevier, vol. 107(C), pages 585-599.
    18. Cahill, Caiman J. & Ó Gallachóir, Brian P., 2010. "Monitoring energy efficiency trends in European industry: Which top-down method should be used?," Energy Policy, Elsevier, vol. 38(11), pages 6910-6918, November.
    19. Duran, Elisa & Aravena, Claudia & Aguilar, Renato, 2015. "Analysis and decomposition of energy consumption in the Chilean industry," Energy Policy, Elsevier, vol. 86(C), pages 552-561.
    20. Liu, Hong & Wang, Chang & Tian, Meiyu & Wen, Fenghua, 2019. "Analysis of regional difference decomposition of changes in energy consumption in China during 1995–2015," Energy, Elsevier, vol. 171(C), pages 1139-1149.

    More about this item

    Keywords

    Decomposition analysis; Divisia Index; ´Logarithmic mean; Energy consumption; Emissions;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:gunwpe:0213. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jessica Oscarsson (email available below). General contact details of provider: https://edirc.repec.org/data/naiguse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.