Energy-related CO2 emission in European Union agriculture: driving forces and possibilities for reduction

Climate change mitigation is a key issue in formulating global environmental policies. Energy production and consumption are the main sources of greenhouse gas (GHG) emissions in Europe. Energy consumption and energy-related GHG emissions from agriculture are an important concern for policymakers, as the agricultural activities should meet food security goals along with proper economic, environmental, and social impacts. Carbon dioxide (CO2) emission is the most significant among energy-related GHG emissions. This paper analyses the main drivers behind energy-related CO2 emission across agricultural sectors of European countries. The analysis is based on aggregate data from the World Input-Output Database. The research explores two main directions. Firstly, Index Decomposition Analysis (IDA), facilitated by the Shapley index, is used to identify the main drivers of CO2 emission. Secondly, the Slack-based Model (SBM) is applied to gauge the environmental efficiency of European agricultural sectors. By applying frontier techniques, we also derive the measures of environmental efficiency and shadow prices, thereby contributing to a discussion on CO2 emission mitigation in agriculture. Therefore, the paper devises an integrated approach towards analysis of CO2 emission based upon advanced decomposition and efficiency analysis models. The research covers eighteen European countries and the applied methodology decomposes contributions to CO2 emission across of regions and factors. Results of IDA suggest that decreasing energy intensity is the main factor behind declines in CO2 emission. According to the SBM, the lowest carbon shadow prices are observed in France, Finland, Sweden, Denmark, the Netherlands, Poland, and Belgium. These countries thus have the highest potential for reduction in CO2 emission. The results imply that measures to increase energy efficiency are a more effective means to reduce CO2 emissions than are changes in the fuel-mixLietuvos agrarinės ekonomikos institutasLietuvos energetikos institutas, dalia@mail.lei.ltVytauto Didžiojo universitetasŽemės ūkio akademij