How can Chile move away from a high carbon economy?

Abstract

This paper quantitatively evaluates the performance of Chile's CO2 emissions between 1991 and 2013 using a ‘complete decomposition’ technique to examine emissions and their components. A decomposition analysis based on log-mean divisia index method (LMDI I) was conducted. Six decomposition factors were considered: Carbon Intensity effect (CI), RES penetration effect (RES), Energy Intensity effect (EI), Economy Structure effect (ES), Income effect (Yp) and Population effect (P). To know how these factors could influence each other in the future, the Innovative Accounting Approach (IAA) was used, including forecast error variance decomposition and Impulse Response Functions (IRFs). These two methodologies allow us to identify the drivers of CO2 emission changes in the past (1991–2013), test policy measures and learn how these drivers could influence each other in the future, to evaluate whether the current measures meet the Paris commitments. The LMDI analysis results show that the Energy Intensity Factor is the main compensating factor of Chile's CO2 emissions and the only effect with a clear trend to aid the economy's decoupling. IAA and IFRs results react similarly and confirm that carbon intensity reacts to shocks more significantly in the short term. The reaction to RES has the same and opposite behavior to shocks in ES and Yp, to disappear in the long term.