The ?emission disease? of services

It is almost conventional wisdom that the shift to services will reduce the environmental impacts of the economy as a whole. This idea critically depends on a static vision about the relatively low emissions per unit of output produced in services compared to other sectors. Provided that this is generally true in advanced economies, the idea can be however challenged or, at least, validated, based on two arguments. First, the dynamic capability of services to improve its own emission coefficients could be lower compared to manufacturing and industry, which could depend to the different innovation capacity (invention and application) of services themselves. Second, the indirect impacts of services through the supply chain of intermediate inputs can be much higher than direct emissions coefficients. The shift to services can deliver a limited global advantage of efficiency even on a static perspective when the global emissions in the supply chain (wherever they occur) instead of the direct domestic emissions are considered. The reasoning is not too different from the Baumol cost disease theory on the systematic difference between productivity gains in services and manufacturing and then we will envisage a similarity by referring to an ‘emission disease of services’. In translating the Baumol disease concept to emission intensity there can be: (a) a direct emission disease, i.e. the gains in efficiency (specific, as micro-technologies) in services can be systematically lower than in manufacturing; (b) an indirect emission disease at the sector level. If the BD applies, the increase in real output, which is our denominator for emission intensity indicators, in services will grow slower than in manufacturing, and this will increase systematically emission efficiency per unit of real output in manufacturing compared to services even if no emission change will take place at the micro-level. So the Baumol disease will bring to a component of emission disease by itself. This paper will explore these hypotheses using an EEIO (Environmentally Extended Input Output) approach that can represents the structure and dynamics of inter-sectoral relationships inside an economy and its foreign trade and will exploit a newly produced database (WIOD). The WIOD (World Input Output Database) database collects input-output tables (national and worldwide), sector accounts and environmental extensions (NAMEA) for 39 countries for the period 1995-2009. We focus, for the moment, on seven European countries, providing mixed evidence for our set of hypothesis.