Tales from the tails: sector-level carbon intensity distribution

The level of GDP, its sector composition and the carbon intensity of individual sectors together determine a country’s emissions. To evaluate the contribution of changes in each determinant, I construct counterfactual emissions scenarios in a sample consisting of 34 sectors in 37 countries over 1995-2009. I compare these scenarios quantitatively using a novel metric, namely the relative cumulative emissions. I find that the composition of output and the carbon intensity of sectors individually or jointly constrained emissions in a large majority of countries. This motivates an analysis of high- and low-carbon intensity sectors, denoted HCI and LCI, where emissions and value-added tend to be concentrated, respectively. I document the cross-country variation in HCI sectors’ carbon intensity and show it declines over time largely due to improvements in developing countries. HCI sectors tend to account for a smaller share of employment; be more capital intensive; and employ a workforce with a lower average skill level. Employment declined in HCI sectors and increased in LCI sectors with its composition shifting towards high-skilled workers in both. Capital intensity growth was faster but multifactor productivity growth was slower in HCI sectors.