Carbon emissions, energy consumption and sustainable development in Ecuador (1980-2025)system dynamics modelling, decomposition analysis and the Environmental Kuznets Curve

Resumen

The consumption of energy and carbon emissions related income growths are a development challenge requiring analysis and policy insights. Several analysis of future change in economies relies on quantitative point forecasts within which accuracy is difficult to achieve. A System Dynamics (SD) model based on scenario analysis approach has been built for Ecuador within the medium term (up to 2025). This research applied a combination of decomposition analysis and scenario analysis to identify and analyze the driving forces of change of CO2 emissions in Ecuador, historically from 1980-2010 and in the coming future to 2025. The historical decomposition used the LMDI technique and was further quantified to 2025 using an integrated qualitative and quantitative scenario approach to explore plausible alternative developments. The historical analysis gives insights at macro and sectoral level to attribute change to a range of structural, scale, energy mix, and intensity effects. The macro decomposition was based on an extended Kaya identity while the sectoral try to offers deeper insights. In addition a formation of GDP approach that depends on renewable energy, which introduces a feedback mechanism in the model and allows us to generate a non-trivial evolution of the system has been introduced in the model building. The four scenarios show divergence in emissions trajectories based on alternative development paths. In particular, it was paid special attention to the effect of a reduction of the share of fossil energy, as well as of an improvement in the efficiency of the fossil energy use. The outcomes estimated are in absolute emission totals but also in sectoral contribution. In a deeper analysis of the model outcome, we has studied the Environmental Kuznets Curve (EKC) hypothesis for Ecuador in a forthcoming period, 2011-2025 using the proposed scenarios. Our proposal goes a step further than previous contributions, and intends to see under which conditions a country could approach the fulfillment of this hypothesis in the medium term. The results do not support the fulfillment of the EKC, nevertheless, the estimations show that Ecuador could be on the way to achieving environmental stabilization in the near future. Indeed, our estimates show that Ecuador could be able to enter the area of environmental stability (second stage of the EKC) in the medium term (2019-2021). However, to achieve this goal it is essential to implement policies that allow the diversification of energy sources and to increase energy efficiency in the productive sectors in order to get more sustainable development. The final conclusion of this work suggests that emissions can evolve on higher or lower emissions trajectories based not only on the evolution of economic growth but on the evolution of the development path. Within the development path, economic growth interacts with governance and societal choices and the other driving forces.