The role of labor and capital in sectoral CO2 emissions and linkages: The case of China, India and the USA

The primary resources of labor and capital are required for the industrial production process. It could be argued that industries cannot produce CO2 emissions unless primary resources are available. However, few studies have focused on estimating the role of primary resources in the production of industrial CO2 emissions. Furthermore, primary resource-induced inter and intra-sectoral linkages have received little attention. The purpose of this research is to estimate the role of primary resources in driving direct and net CO2 emissions (net CO2 linkages) in China, India, and the United States, all of which are at different stages of economic development. This study estimated the supply-induced CO2 emissions and linkages of China, India, and the United States using the Ghosh supply input-output model and by proposing some new supply-induced net emission linkage measures. The findings revealed that, when compared to fixed capital, labor produced more total and net carbon emissions in all three countries. The utility sector of "Electricity, gas, and water" (EGW) had the highest amount of labor and capital-induced emissions of all three nations. However, further decomposition of these emissions revealed the impact of different levels of economic development. In the services-based developed economy of the United States, input supplies from the sector of "Financial Intermediation and Business Activities" resulted in the highest emissions of the downstream sectors. The largest amount of downstream emissions was caused by supplies from the raw material supplier of "Mining and quarrying" in the industrial-based Chinese economy. While in India, which has a comparatively more agro-based economy, the "Agriculture" sector caused the greatest amount of downstream emissions. Our findings on supply-induced CO2 emissions of major countries at various levels of economic development can help guide both developed and developing economies to reduce industrial carbon emissions by efficiently managing and reallocating primary resource supplies to sectors.