Driving Forces of CO2 Emissions in Emerging Countries: LMDI Decomposition Analysis on China and India's Residential Sector

The main objective of this paper is to identify and analyze the key drivers behind changes of CO2 emissions in the residential sectors of the emerging economies, China and India. For the analysis, we investigate to what extent changes in residential emissions are due to changes in energy emissions coefficients, energy consumption structure, energy intensity, household income, and population size. We decompose the changes in residential CO2 emissions in China and India into these five contributing factors from 1990 to 2011 by applying the Logarithmic Mean Divisia Index (LMDI) method. Our results show that the increase in per capita income level was the biggest contributor to the increase of residential CO2 emissions, while the energy intensity effect had the largest effect on CO2 emissions reduction in residential sectors in both countries. This implies that investments for energy savings, technological improvements, and energy efficiency policies were effective in mitigating CO2 emissions. Our results also depict that the change in CO2 emission coefficients for fuels which include both direct and indirect emission coefficients slowed down the increase of residential emissions. Finally, our results demonstrate that changes in the population and energy consumption structure drove the increase in CO2 emissions.