E C O N O M I C R E P O R T O F T H E P R E S I D E N T

carbon dioxide emissions per unit of GNP (Box 7-1). Advances in energytechnology and changes in primary energy sources may have contributed to thisimprovement.Box 7-1. Structural Economic Change and CarbonDioxide EmissionsHistorically, U.S. carbon dioxide (CO 2) emissions from energy usehave grown about 2/3 percent for every 1 percent increase in real grossdomestic product (GDP). In general, a variety of factors besides growthin aggregate output can affect CO 2emissions.Structural change. The U.S. economy continues to experience a shiftof its output composition away from traditionally energy-intensivemanufacturing sectors.Weather. Cold winters increase the demand for heating fuels, andhot summers increase the demand for electricity for cooling. Becauseheating on a cold day is more energy-intensive than cooling on a hotday, on balance a warmer year tends to reduce energy use.Energy prices. Sharp energy price increases can stimulate energyefficiency and reduce CO 2emissions, whereas energy price decreasescan result in higher energy consumption and higher CO 2emissions.Technological change. Technological improvements can reduce theconsumption of energy necessary to generate a unit of output. Higherenergy prices can accelerate the diffusion of more energy-efficienttechnologies, as can government programs aimed at promoting energyefficiency.In 1998, U.S. CO 2emissions from energy use grew 0.4 percent, whileoutput in non-high-technology industries grew just 2.3 percent—lessthan the 4.3 percent increase in aggregate GDP and less than the longtermtrend rate of growth of 3.1 percent per year for this group ofindustries. This slow emissions growth probably reflected not only thelong-term shift toward high technology and services in the economybut also weakness in several energy-intensive industries, such aschemicals and primary metals. Weather, too, played a role in moderatingenergy use. The winter months of 1998 were 8 percent warmer thanthe same months in the previous year. The summer of 1998 was alsowarmer than the previous year’s, but the increase in emissions frommore summer cooling was less than the reduction in emissions fromless winter heating. Finally, electricity prices changed little, and fossilfuel prices actually fell, between 1997 and 1998.A statistical model of how structural change, weather conditions,and energy prices influenced U.S. CO 2emissions over the 1962-98period found that these emissions track non-high-technology outputvery closely. After accounting for non-high-technology output, weather,continued on next page...Chapter 7 | 243