On the Effects of Infrastructure Investments on Industrial CO2 Emissions in Portugal

Abstract

We estimate the effects of infrastructure investments on industrial CO₂ emissions in Portugal based on the economic effects of twelve types of infrastructure investments on twenty-two different industries and the industry-specific CO₂ emission factors. Our conclusions are as follows. First, most infrastructure investments help the emissions intensity of the economy. The exceptions are investments in airports and healthcare. Second, the economic effects of the different types of infrastructure investments on the electrical power industry are central in determining the overall effects on emissions. Indeed, electric power accounts for 35% of CO₂ emissions and has extremely high emissions factor. Third, if the emissions from electricity generation were eliminated, most infrastructure investments would still lead to a decline in emissions intensity. Investments in national roads would leave the emissions intensity unchanged while investments in healthcare have adverse effects. There are several important policy implications of these results. Given the present electric generating mix, investment in national roads are appropriate from an environmental perspective, while investments in airport infrastructure are not. Under a scenario of aggressive use of renewable energy sources in electricity generation, however, the best investments would be in railroads and airports, two industries highly dependent on the use of electricity.