Impact of consumption pattern on carbon dioxide emissions in Malaysia

This thesis is focused on CO2 emissions related to the consumption pattern in Malaysia arising from the remarkable increase in private consumption in the 1990s and 2000s. This is an important issue that could help change household consumption behavior and demand towards more environmental-friendly products because households play an important role in determining the demand for these products corresponding to reduced CO2 emission. The first part of the study identifies the consumption pattern according to the expenditure on energy-based and non-energy-based products and services using compounded annual growth rate (CAGR). The main feature in this part is that the consumption pattern is divided into two categories: direct and indirect energy consumption. Households consume not only direct energy in the form of electricity and petroleum products, but also indirect energy through purchased goods and services. It is shown that the greatest direct energy consumption by households came from electricity in 1991 and 2005 and from petroleum products in 2000 while the greatest indirect energy consumption came from real estate in 1991 and 2000 but shifting to wholesale and retail trade in 2005. This pattern is interesting because in the 1990s, consumers preferred to buy properties (real estate) but in the 2000 they turned to wholesale and retail trade and motor vehicles. The second part of the study analyses CO2 emissions by consumption pattern by employing the simple energy-emission model in measuring direct CO2 emissions (household side), and extended input-output (hybrid input-output table) and hybrid input-output analysis in measuring indirect CO2 emissions (production side). The analysis shows that direct CO2 emissions (household side) were stable compared with indirect CO2 emissions (production side). On the production side, there were remarkable increases in CO2 emissions in 2005 at about 24 percent of the total CO2 emissions if compared with 1991 and 2000 when the emissions were more stable at about 17 and 18 percent respectively. The third part of the study investigates the changes in CO2 emissions by households by examining the sources of structural change in CO2 emissions (direct and indirect) due to household consumption pattern over the 1991-2005 period by using the simple decomposition model (SDM) and structural decomposition analysis (SDA) for direct and indirect CO2 emissions respectively. The consumption pattern in Malaysia is seen to have undergone a number of structural changes caused mainly by variation in the composition of domestic demand. This analysis indicates that as income increased, there was a rapid change in consumption pattern, mainly the demand for motor vehicles, wholesale and retail trade, construction and services which had high impact on the CO2 emissions. From the overall result, we can conclude that changing household behavior is the best way to reduce CO2 emissions generated by the household because every household consumption will affect the environment whether directly or indirectly. The output of this study can be utilized in energy/environmental policy analysis and future energy demand. For instance, changes in sectoral energy intensity can be influenced through a variety of energy policy measures. By doing so, industrial activity can indirectly be controlled to address environmental issues towards sustainable development.

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