Decoupling economic growth from GHG emissions: Decomposition analysis by sectoral factors for Australia

Australia has celebrated twenty-six consecutive years of economic growth without a recession. Simultaneously, it is one of the ten largest emitters of greenhouse gases (GHG). This paper employed the Logarithmic Mean Divisia Index method to provide evidence of the effect of decoupling economic growth from GHG emissions for all Australian sectors and used an efficiency index to provide evidence of the evolution in efficiency of the Australian sectors, over the period 1990-2015. The results obtained indicate that Australia experienced strong decoupling. However, only two of the six sectors (agricultural and commercial services) exhibited strong decoupling, while the others demonstrated weak decoupling. Among these, the agricultural sector performed a dominant role in decoupling, whereas the construction sector made the most marginal contribution. In terms of factors effect, economic activity, followed by energy emissions, were the factors that most contributed to the decoupling. These effects were due to high Australian economic growth, and to high GHG emission reductions in the agricultural sector, respectively. Over the period under analysis, Australia was able to reduce national GHG emissions. With respect to efficiency by sector, the construction sector proved to be the most efficient, while the agricultural sector proved to be the least efficient. Australia should invest more in efficient technology so that all sectors become more efficient while simultaneously continuing to reduce their GHG emissions. (C) 2018 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights reserved.