Premium
Environmental Impacts of Capital Formation
Author(s) -
Södersten CarlJohan,
Wood Richard,
Hertwich Edgar G.
Publication year - 2018
Publication title -
journal of industrial ecology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.377
H-Index - 102
eISSN - 1530-9290
pISSN - 1088-1980
DOI - 10.1111/jiec.12532
Subject(s) - gross fixed capital formation , gross domestic product , national accounts , capital formation , economics , investment (military) , goods and services , fixed investment , business , ecological footprint , measures of national income and output , natural resource economics , monetary economics , macroeconomics , sustainability , economy , financial capital , economic growth , ecology , biology , politics , political science , law , human capital
Summary The investment in capital goods is a well‐known driver of economic activity, associated resource use, and environmental impact. In national accounting, gross fixed capital formation (GFCF) constitutes a substantial share of the total final demand of goods and services, both in terms of monetary turnover and embodied resources. In this article, we study the structure of GFCF and the environmental impacts associated with it on a global scale, and link it to measures of development. We find that the share of GFCF as part of the total carbon footprint (CF) varies more across countries than GFCF as a share of gross domestic product (GDP). Countries in early phases of development generally tend to invest in resource‐intensive assets, primarily infrastructure and machinery, whereas wealthier countries invest in less resource‐intensive assets, such as computers, software, and services. By performing a structural decomposition analysis, we assess the relative importance of investment structure and input‐output multipliers for the difference in carbon intensity of capital assets, and find that the structure of investments plays a larger role for less‐developed countries than for developed countries. We find a relative decoupling of the CF of GFCF from GDP, but we can neither confirm nor rule out the possibility of an absolute decoupling.