This study explores the inter-relationships among economy, energy and CO2 emissions of 37 industrial sectors in Taiwan in order to provide insight regarding sustainable development policy making. Grey relation analysis was used to analyse the productivity, aggregate energy consumption, and the use of fuel mix (electricity, coal, oil and gas) in relation to CO2 emission changes. An innovative evaluative index system was devised to explore grey relation grades among economics, energy and environmental quality. Results indicate that a rapid increase in electricity generation during the past 10 years is the main reason for CO2 emission increase in Taiwan. The largest CO2 emitting sectors include iron and steel, transportation, petrochemical materials, commerce and other services. Therefore, it is important to reduce the energy intensity of these sectors by energy conservation, efficiency improvement and adjustment of industrial structure towards high value-added products and services. Economic growth for all industries has a more significant influence, than does total energy consumption, on CO2 emission increase in Taiwan. It is also important to decouple the energy consumption and production to reduce the impacts of CO2 on economic growth. Furthermore, most of the sectors examined had increased CO2 emissions, except for machinery and road transportation. For high energy intensive and CO2 intensive industries, governmental policies for CO2 mitigation should be directed towards low carbon fuels as well as towards enhancement of the demand side management mechanism, without loss of the nation's competitiveness.
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