Manufacturing Industries and Footprints: How Energy Structure Determines Environmental Quality

ABSTRACT Greenhouse gas (GHG) emission in the Norwegian manufacturing industry has declined significantly relative to 1990 levels; however, the industry remains the third emitter of GHGs. This implies that achieving “a low‐emission society” target (detailed in the Norwegian Climate Act) depends on sustaining industrial emission mitigation efforts. To advance knowledge on the heterogeneity of GHG emission reduction progress across the country's manufacturing industry, the study examines whether the industry's output and energy structure impact carbon dioxide (CO 2 ) and GHG (excluding CO 2 ) emissions disproportionately both at the industry's aggregate level and subsector levels of the industry. As such, panel‐corrected standard errors (PCSEs) and autoregressive distributed lag (ARDL) approaches are respectively employed for the industry's aggregate level and subsector levels analyses. At the industry's aggregate level: (i) output improves environmental quality by mitigating CO 2 emission while showing no significant impact on GHG (excluding CO 2 ) emissions, (ii) the use of oil, natural gas, and electricity energy sources worsens environmental degradation by increasing carbon emission while biofuels exert a desirable environmental effect by mitigating CO 2 emission, and (iii) electricity and biofuels sources spur other GHG emissions (excluding CO 2 ) while oil exerts a reverse effect. Meanwhile, at the subsector levels, environmental quality is worsened in each of the 13 manufacturing industries (by oil consumption), 9 subindustries (by natural gas consumption), 8 subindustries (by electricity consumption), and 6 subindustries (by biofuel consumption). However, the energy mix also improves environmental quality in a few subindustries. These results furnish industry practitioners and decision makers with useful policy inference.