We examined historical contributions of inter fuel substitution, changes in carbon efficiency and energy intensity, growth of economy and population to the APEC countries' CO₂emissions from 1980 to 1998 using a perfect decomposition approach. We also investigated whether or not CO₂emissions in the member countries are increasing by using new criteria suggested by Sun (2000). By adopting log mean Divisia method, we explained the causes of the differences of both the total and per capita CO₂emissions between the income groups of APEC countries.

The study reveals that economic growth (i.e. per capita income growth) is the most significant factor to CO₂emissions growth in most countries other than Russia, Peru, and Philippines. Population growth is another important factor that contributes CO₂emissions growth in all countries but Russia.

Changes in the energy intensity, fuel substitution, and carbon coefficient may be classified as negative contributors to CO₂emissions growth. Especially, enhanced energy intensity played dominant role in halting CO₂emissions growth in developed countries. In some less-developed countries, however, this factor played reversed role.

If the effect of per capita income growth was set aside, many countries achieved negative growth rate of CO₂emissions. Advanced countries like USA, Japan and Canada achieved more than 1% average annual decrease rate. This emission decrease is explained by improvement of energy efficiency. In most developing countries, however, they could not improve energy efficiency except China, which recorded considerable success in enhancing energy intensity.

In the income group comparison, per capita income effect explains the higher emission level in advanced countries than in the developing countries. Meanwhile other factors contributed to narrow the emission gaps between the groups. Above all, the higher energy efficiency in advanced economies is the most outstanding factor to decrease the gaps.
Based on these findings, we may draw implications on policy options for CO₂emissions mitigations and find ways to strengthen environmental co-operations among APEC member economies. Developing countries need to accelerate substitutions of fossil fuels to CO₂free or less CO₂intensive fuels, to enhance carbon emissions efficiency, and to improve energy efficiency. Improving energy efficiency through various measures will yield desirable results. Controlling population growth in low income countries is also an essential factor in checking rapid CO₂emissions growth.

In achieving emissions mitigation in developing countries, environmental cooperation among APEC member countries is essential. Developed countries need to transfer adequate technology and to finance to less-developed countries in enhancing clean and sustainable energy and economic development. To this purpose, APEC countries need to actively utilize the Kyoto Mechanism, which is Joint Implementation (JI), Clean Development Mechanism (CDM), and International Emissions Trading (IMT). The Prototype Carbon Fund to be operated by the World Bank may be a good source to expand such investment to the developing countries.

Among APEC economies, we find there exist big carbon credit suppliers and buyers. Most developing countries including China, Malaysia, Indonesia, Viet Nam, Peru, and Thailand are found to have very large potential to provide carbon credits. While USA, Japan, and Canada have to buy carbon credits to meet their commitments to the Kyoto Protocol. In that sense, activating intra-regional trading of carbon credits in the International Emissions Trading Regime proposed by the Kyoto Protocol is recommended. It may be conceivable to form an environmental bubble like the Umbrella Group that includes USA, Japan, Russia, Canada, Australia, New Zealand, etc.

I. Introduction

II. Economic Growth, Energy Consumption, and CO₂Emissions
1. The APEC Economies and the UNFCCC
2. The Relationship between Environment and Economic growth

III. An Analysis of CO₂Emissions in APEC economies
1. Breakdown of the CO₂Emissions Changes
2. The Trends of CO₂Emissions: Increase or Decrease ?
3. Group Comparisons

IV. Summary and Implications on Mitigation Policies and Regional Cooperation