Journey to world top emitter: An analysis of the driving forces of China's recent CO2 emissions surge

China's economy has been growing at an accelerated rate from 2002 to 2005 and with it China's carbon emissions. It is easier to understand the growth in China's carbon emissions by considering which consumption activities - households and government, capital investments, and international trade - drive Chinese production and hence emissions. This paper adopts structural decomposition analysis, a macro-economic approach using data from national statistical offices, to investigate the drivers of China's recent CO₂ emissions surge. The speed of efficiency gains in production sectors cannot cope with the growth in emissions due to growth in final consumption and associated production processes. More specifically, Chinese export production is responsible for one-half of the emission increase. Capital formation contributes to one-third of the emission increase. A fast growing component is carbon emissions related to consumption of services by urban households and governmental institutions, which are responsible for most of the remaining emissions.