Methodological issues in cross-country region decomposition of energy and environment indicators

A recent development in energy and environment decomposition analysis is the application of the technique to cross-country region comparisons. Cross-country region decomposition gives rise to several problems that do not normally occur in chronological decomposition of changes in a specific country. These include large variations in explanatory factors in the data, the measure of economic output and structural comparability. We examine these problems using energy-related CO emission data of three world regions. It is concluded 2 that the conventional decomposition methods are not effective in cross-country region studies as they tend to leave a large residual. Instead, perfect decomposition methods should be adopted. The choice of economic output measure can affect decomposition results greatly and the impacts vary from one decomposition method to another. 2001 Elsevier Science B.V. All rights reserved. JEL classifications: C50; Q41