Are Services Better for Climate Change?

Embodied greenhouse gas (GHG) emissions and their structure of inducement by the supply-chain networks of 480 goods and services in the United States are analyzed for 44 GHGs. Producing a dollar of a product or service generates an average of 0.36 kg of CO2 equivalent GHGs onsite, increasing to 0.83 kg when supply-chain-induced emissions are taken into account. Services produce less than 5% of total U.S. GHG emissions directly, and their direct GHG emission intensities per dollar output are much less (0.04 kg C02 equiv/dollars) than those of physical products, even when supply-chain-induced emissions are included (0.47 kg C02 equiv/dollars). When both supply-chain effects and the volume of household expenditures are taken into account, however, household consumption of services excluding electric utilities and transportation services proves to be responsible for 37.6% of total industrial GHG emissions in the United States, almost twice the amount due to household consumption of electric utility and transportation services. Given the current structure of GHG emissions, a shift to a service-oriented economy is shown to entail a decrease in GHG emission intensity per unit GDP but an increase, by necessity, in overall GHG emissions in absolute terms. The results are discussed in the context of U.S. climate change policy.