IEEJ： March ©IEEJ 2024
Special Bulletin
A Japanese Perspective on the International Energy Landscape (680)

March 13, 2024

Decoupling Emission Growth from Economic Growth GloballyKen Koyama, PhD
Chief Economist, Senior Managing Director
The Institute of Energy Economics, JapanThe world is now stepping up its efforts to promote a new energy transition. Not only
developed economies but also many other economies around the world have declared that they aim toachieve carbon neutrality by 2050, 2060, or 2070. In addition, they have voluntarily set out greenhousegas emission reduction targets for 2030 to achieve these long-term targets under the Paris Agreement
and are making efforts to attain them. Based on the outcome of last year's 28th Conference of theParties to the United Nations Framework Convention on Climate Change, known as COP28, countries
are trying to review and enhance emission reduction targets towards 2035.
Russia's aggression into Ukraine in 2022 has reminded the world of the importance of energy
security. The importance of energy as a commodity that supports daily life and serves as the foundationof the economy and industry has been strongly understood. It has been recognized that our society
cannot exist without a stable supply of energy. In this way, the world is required to promote the energy
transition to achieve both energy security and decarbonization. The basic prescription given forachieving this goal calls for thoroughly improving the efficiency of energy use, for increasing energy
self-sufficiency, for maximizing the use of clean energy, and for enhancing flexibility and resilience
to respond to unforeseen circumstances and emergencies. Countries around the world are trying toimplement the prescription.
On the other hand, we must look at the reality of global energy consumption and recognizethat global energy supply and demand are still heavily and structurally dependent on fossil fuels before
the energy transition to be pursued in the future. As of 2022, global primary energy consumption
totaled 604 exajoules (quintillion joules), up 52% from 397 EJ in 2000. In 2022, oil accounted for thelargest share of energy consumption at 32%, followed by 27% for coal, and 23% for natural gas. Fossil
fuels’ share thus stood at 82%. Among non-fossil energy sources, renewable energy, known for its
remarkable expansion in recent years, accounted for 7% of energy consumption, hydropower for 7%,
and nuclear power for 4%. It is clear that the importance of fossil fuels is overwhelmingly high in theworld as a whole. Another important point is that the abovementioned energy consumption in 2022
was supported by the existing stock of huge supply chains that stretch across the world and eachcountry, as well as infrastructure and energy use equipment. This means that the flow of energy
consumption at a certain point in time is realized by the energy-related stock in the background. Inorder to promote a fundamental energy transition, the whole of the stock must be transformed
dramatically over the long term.
With regard to decarbonization, which is one of the key objectives of the energy transition,
we are confronted with the reality that global CO2 emissions have continued to increase for a longtime. Global energy-related CO2 emissions increased by 45% from 23.7 billion tons in 2000 to 34.4
billion tons in 2022. Although the increase in CO2 emissions is slightly lower than the growth inprimary energy consumption, the increase in CO2 emissions almost coincided with the growth in1

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energy consumption. Over the past 22 (or more) years, global CO2 emissions were basically on anupward trend. Exceptionally, emissions remarkably declined in 2009 and 2020. In 2009, the global
economy contracted amid the global financial crisis. In 2020, CO2 emissions posted anunprecedentedly large decrease of more than 5% from the previous year to 32.3 billion tons due to an
unprecedentedly fast global economic decline under the COVID-19 pandemic. It is perceived that theeconomic slump was combined with strong regulatory measures such as city lockdowns to bring about
this significant decrease in CO2 emissions.
What does this mean? There has been a strong link between economic growth and theincrease in CO2 emissions in the world as a whole, indicating that economic growth has been coupledwith the CO2 emission increase. Of course, this is closely related to factors such as global energy
consumption trends and the presence and influence of the vast stock that supports energy consumption.
In the context of this reality, it can be said that what the world is trying to do now is to fundamentally
decouple CO2 emission growth from economic growth while promoting the energy transition. Thismeans that the world as a whole is required to dramatically reduce CO2 emissions while maintaining
economic growth in the future.
Needless to say, however, the decoupling is indeed a momentous challenge. One of thefactors contributing to the difficulty and complexity of the challenge is the huge existing stock ofenergy supply chains, infrastructure, and consumer equipment as mentioned above. On the other hand,
it may be pointed out or argued that, although this challenge may be difficult, there are many cases inwhich CO2 emission growth has been decoupled from economic growth. Developed economies such
as Japan, the United States, and Europe have reduced CO2 emissions over the past 10 to 20 years,
although reduction degrees have varied, with progress having failed to be linear or continuous. At thesame time, however, they have continued to achieve certain levels of economic growth, although their
growth has been slower than in emerging economies. In this sense, developed economies can beviewed as having decoupled CO2 emission growth from economic growth successfully.
However, it cannot be overlooked that global CO2 emissions continued to expand. While
global emissions increased, the developed economies covered by the Organization for Economic
Cooperation and Development reduced their share of global emissions from 13.1 billion tons or 56%
in 2000 to 11.6 billion tons or 34%, with non-OECD countries expanding their share from 10.6 billion
tons or 44% to 22.8 billion tons or 66%. There is no doubt that there are many areas in which developed
economies have taken the lead in enhancing efforts to cut emissions and achieving progress inemission reductions. However, we cannot overlook the fact that industrial sectors with high CO2emissions in developed economies have relocated their bases to developing economies while
enhancing efforts to cut emissions. A type of carbon leakage has actually occurred. Given this, it seems
that the successful global decoupling of CO2 emission growth from economic growth will be an evenmore difficult challenge.
Developing and emerging economies will hold the key to the successful global CO2 emission
reduction in the future. However, there is no sign at this point that their CO2 emission growth will be
decoupled from their economic growth. Their position is that economic growth and development areimportant and should not be constrained by the energy transition. After the relocation of CO2 emission
bases has contributed to developed economies’ successful decoupling of CO2 emission growth from
economic growth, developing and emerging economies may be confronted with the question ofwhether they can secure relocation destinations. If they can secure relocation destinations, it may be aproblem for global decoupling. The question is how to break the link between economic growth andCO2 emission growth through historic changes on a global scale. Emission reduction measures in2

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developing and emerging economies, which are at the center of the challenge, are an issue not only
for them, but also for the entire world. They must cooperate with developed economies in cuttingemissions.

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