The modest environmental relief resulting from the transition to the service economy

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The modest environmental relief resulting from the transition to the service economy. / Henriques, Sofia; Kander, Astrid.

In: Ecological Economics, Vol. 70, No. 2, 2010, p. 271-282.

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TY - JOUR

T1 - The modest environmental relief resulting from the transition to the service economy

AU - Henriques, Sofia

AU - Kander, Astrid

PY - 2010

Y1 - 2010

N2 - A service transition is supposed to lead to the decline of energy intensity (energy/GDP). We argue that this interpretation is overly optimistic because the shift to a service economy is somewhat of an illusion in terms of real production. Several recent studies of structural effects on energy intensity have made the error of using sector shares in current prices, combined with GDP in constant prices, which is inconsistent and ignores the different behaviour of prices across sectors. We use the more correct method of sector shares in constant prices, and make an attempt to single out the effect from the real service transition by using two complementary methods: shift share analyses in current and constant prices, and Logarithmic Mean Divisia Index (LMDI) for 10 developed and 3 emerging economies. A service transition is rather modest in real terms. The major driver of the decline in energy intensity rests within the manufacturing sector. Meanwhile, the transition to a service sector had a small downward impact on energy intensity in 7 of the developed countries (and no impact in the others). For emerging economies like Brazil, Mexico and India, it is the residential sector that drives energy intensity down because of the declining share of this sector as the formal economy grows, and as a consequence of switching to more efficient fuels.

AB - A service transition is supposed to lead to the decline of energy intensity (energy/GDP). We argue that this interpretation is overly optimistic because the shift to a service economy is somewhat of an illusion in terms of real production. Several recent studies of structural effects on energy intensity have made the error of using sector shares in current prices, combined with GDP in constant prices, which is inconsistent and ignores the different behaviour of prices across sectors. We use the more correct method of sector shares in constant prices, and make an attempt to single out the effect from the real service transition by using two complementary methods: shift share analyses in current and constant prices, and Logarithmic Mean Divisia Index (LMDI) for 10 developed and 3 emerging economies. A service transition is rather modest in real terms. The major driver of the decline in energy intensity rests within the manufacturing sector. Meanwhile, the transition to a service sector had a small downward impact on energy intensity in 7 of the developed countries (and no impact in the others). For emerging economies like Brazil, Mexico and India, it is the residential sector that drives energy intensity down because of the declining share of this sector as the formal economy grows, and as a consequence of switching to more efficient fuels.

KW - energy intensity

KW - service economy

KW - environmental kuznets curve

U2 - 10.1016/j.ecolecon.2010.08.010

DO - 10.1016/j.ecolecon.2010.08.010

M3 - Article

VL - 70

SP - 271

EP - 282

JO - Ecological Economics

JF - Ecological Economics

SN - 0921-8009

IS - 2

ER -