Gone with the wind: a structural decomposition of carbon emissions in Portugal

Understanding the driving forces underlying greenhouse gas emissions is vital for the design of climate and environmental policies aimed at promoting sustainable development and human well-being. In particular, we focus on Portugal where a striking reduction of carbon emissions has been observed in just a few years. We perform a structural decomposition analysis over the last two decades allowing to unveil the main drivers underlying the evolution of carbon emissions. We find that the investment on renewable energy sources, namely wind, has been key for a successful transition to a cleaner economy. The impact has been felt both on the reduction of carbon intensity as well as on the increase of energy efficiency in power generation. We also find that such benign evolution was partly counterbalanced by the increase of the contribution of final demand to carbon emissions despite being attenuated with the COVID-19 pandemic.