Is China´s voluntary action on carbon intensity cut too ambitious?

Carbon intensity (CO₂/GDP), as an indicator, is easy to understand and use, but has serious limitations. In most countries, most CO₂ emissions come from consumption of fossil energy. Energy alone cannot produce any output, and it must be combined with other factors, such as capital and labor, in production. Therefore, an economy´s resource endowments will inevitably influence its energy consumption and also CO₂ emissions. For example, energy intensity may increase solely because energy is substituting for labor, rather than any underlying deterioration in emitting technology. This can happen in any modernization process of any economy. This paper therefore suggests we consider an economy´s carbon performance from a total factor perspective. Based on the lessons learned from efficiency analysis literature, a Data Envelopment Analysis (DEA) - based total factor model is proposed. An empirical study was conducted using provincial-level data from China in 2005. Results suggest that China´s voluntary carbon emissions reduction target of 40%-45% by 2020 may be harder than expected to achieve.