A Decomposition Analysis of Energy Use in the Japanese Economy

The purpose of this paper is to present a new approach to evaluating structural change of the economy in a multisector general equilibrium framework. The multiple calibration technique is applied to an ex post decomposition analysis of structural change between periods, enabling the distinction between price substitution and technological change to be made for each sector. This approach has the advantage of sounder microtheoretical underpinnings when compared with conventional decomposition methods. The proposed technique is empirically applied to changes in energy use and carbon dioxide emission in the Japanese economy following the oil crises. The results show that technological change is of great importance for curtailing energy use and carbon dioxide emission in Japan. While economic growth increased CO2 emission by itself, other effects such as technological change for labor or energy mitigated increases in that period.