Investigation for the Decomposition of Carbon Emissions in the USA with C-D Function and LMDI Methods

Residual problems are one of the greatest challenges in developing new decomposition techniques, especially when combined with the Cobb-Douglas (C-D) production function and the Logarithmic Mean Divisia Index (LMDI) method. Although this combination technique can quantify more effects than LMDI alone, its decomposition result has residual value. We propose a new approach that can achieve non-residual decomposition by calculating the actual values of three key parameters. To test the proposed approach, we decomposed the carbon emissions in the United States to six driving factors: the labor input effect, the investment effect, the carbon coefficient effect, the energy structure effect, the energy intensity effect, and the technology state effect. The results illustrate that the sum of these factors is equivalent to the CO2 emissions changes from t to t-1, thereby proving non-residual decomposition. Given that the proposed approach can achieve perfect decomposition, the proposed approach can be used more widely to investigate the effects of labor input, investment, and technology state on changes in energy and emission.