Input-output analysis and environmental responsibility: measures and applications

Transcription

1 Input-output analysis and environmental responsibility: measures and applications Part 2: Production-based vs. consumption-based emissions Umed Temursho Loyola Universidad Andalucía, Seville, Spain Global Responsibility Week, March 27-30, 2017 Nottingham Business School, Nottingham Trent University, UK U Temursho (LUA) Consumption-based emissions March / 22

2 1 Background 2 Production-based emissions 3 Consumption-based emissions The EEBT approach The MRIO approach Differences between the EEBT and MRIO approaches 4 Shared responsibility U Temursho (LUA) Consumption-based emissions March / 22

3 Source: The Global Carbon Atlas ( U Temursho (LUA) Consumption-based emissions March / 22

4 Source: The Global Carbon Atlas ( U Temursho (LUA) Consumption-based emissions March / 22

5 Allocation methods in common use How the global greenhouse gas (GHG) emissions can be distributed between individual countries/regions? 1 Territorial-based. UNFCCC requires submitting National Emissions Inventories, which include greenhouse gas emissions and removals taking place within national territory and offshore areas over which the country has jurisdiction (2006 IPCC Guidelines, p. 1.4) 2 Production-based. Uses the same system boundary as the SNA as is done with GDP. Unlike the first approach, emissions from international activities (international road transport, marine transport, and aviation) are allocated to the country of the vessel s operator. 3 Consumption-based. Emissions are allocated to the country of the consumer, are are equal to production-based emissions minus the emissions from the production of exports, plus the emissions from the production of imports (Peters 2008). U Temursho (LUA) Consumption-based emissions March / 22

6 UK CO 2 emissions, (Mln. tonnes CO 2 ) Source: Department for Environment, Food & Rural Affairs (2017) U Temursho (LUA) Consumption-based emissions March / 22

7 Production-based emissions These data are readily available from Envirinmental Accounts, which are consistent with the concepts, definitions and classifications of the SNA Let pi r be the total carbon emissions (e.g. in kt) in economic sector i and region r The total production-based emissions in region r amount to n i=1 pr i, or compactly, ı p r. Denote region r s direct emission intensity by d r representing the environmental impact per unit of industry output: d r i = pr i x r i for all sectors i = 1,..., n and all regions r = 1,..., R. U Temursho (LUA) Consumption-based emissions March / 22

8 Production-based emissions eebt Recall the basic single-region IO output-side accounting balance: x r = A rr x r + y rr + e r (1) where: A rr is the direct domestic input requirements matrix of region r e r gross exports of region r to all other regions y rr other final demand categories, supplied from domestic production The assumption of fixed input coefficients implies the quantity IO model (Leontief 1986): x r = L r (y rr + e r ) where L r = (I A rr ) 1 is the single-region Leontief inverse Thus, alternatively, production-based emissions by sector: mrio p r = ˆd r x r = ˆd r L r (y rr + e r ) (2) U Temursho (LUA) Consumption-based emissions March / 22

9 Emissions embodied in gross trade flows In the generalized single-region IO model (2), ˆd r L r is the total (direct and indirect) domestic emissions multiplier matrix: Its ij-th element indicates the total domestic emissions generated in sector i to produce a unit of final demand of sector j in region r. Note that only the domestic supply chain in region r is considered U Temursho (LUA) Consumption-based emissions March / 22

10 Emissions embodied in gross trade flows In the generalized single-region IO model (2), ˆd r L r is the total (direct and indirect) domestic emissions multiplier matrix: Its ij-th element indicates the total domestic emissions generated in sector i to produce a unit of final demand of sector j in region r. Note that only the domestic supply chain in region r is considered Fixed A rr assumption implies: for each sector in r, the production for domestic demand y rr has the same characteristics as the production for gross exports e r = s r ers. Note: e rs is the bilateral trade data from region r to region s. This allows one to compute the sectoral emissions embodied in bilateral trade (EEBT) from region r to region s as (Peters 2008): p rs = ˆd r L r e rs (3) U Temursho (LUA) Consumption-based emissions March / 22

11 Summing over all the importing regions s ( r) in (3) gives the total sectoral emissions in region r to produce exports, or the sectoral emissions embodied in exports of region r: p r = s r p rs = ˆd ( r L r e rs) (4) Similarly, the sectoral total emissions in all foreign countries s ( r) to produce imports into region r, or the sectoral emissions embodied in imports of region r are: p r = p sr = ( ) ˆd s L s e sr (5) s r s r s r In the same vein, the sectoral emissions embodied in domestic final demand y rr are p rr = ˆd r L r y rr (6) U Temursho (LUA) Consumption-based emissions March / 22

12 Consumption emissions: the EEBT approach Note that production-based emissions (2) equal to the emissions embodied in domestic demand (6) and in total exports (4): p r = p rr + p r (7) Sectoral consumption-based emissions are the emissions from total domestic consumption, which excludes exports but includes imports (Peters 2008, p.15): c r = p rr + p r (8) The responsibility emission balance is defined as the producer responsibility minus the consumer responsibility. Using (7) and (8): reb r p r c r (9) = p r p r teb r (10) which is exactly equal the trade emission balance of region r. U Temursho (LUA) Consumption-based emissions March / 22

13 The merits of the EEBT approach The EEBT method determines the emissions occurring domestically in one region to produce gross (i.e. intermediate and final) exports to another region As such it addresses the following type of questions: What are the domestic emissions in region A to produce the products that are exported from region A? However, another interesting question is: What are the global emissions to produce the products which are exported from region A? This requires considering the global supply chains, as production in region A requires: Imports from regions B, C,... More production and emissions in these regions, which in turn require Additional imports from other regions More production and emissions worldwide, and so on. U Temursho (LUA) Consumption-based emissions March / 22

14 Consumption emissions: the MRIO approach Bilateral trade data e rs has to be split into intermediate exports Z rs and final exports y rs from region r to s: e rs = Z rs ı + y rs = A rs x s + y rs (11) where the Leontief fixed input coefficients assumption is made. Plugging (11) in (1) yields the MRIO model: x r = A rr x r + y rr + ( A rs x s + y rs) (12) s r Alternatively, in matrix form (12) can be written as: x 1 A 11 A 12 A 1R x 1 x 2. = A 21 A 22 A 2R x x R A R1 A R2 A RR x R s y 1s s y 2s. s y Rs (13) U Temursho (LUA) Consumption-based emissions March / 22

15 Consumption emissions: the MRIO approach Solving (13) for gross outputs gives the standard MRIO model: x 1 I A 11 A 12 A 1R 1 s x 2. = A 21 I A 22 A 2R y 1s s..... y 2s.. (14) x R A R1 A R2 I A RR s y Rs Pre-multiplying regional outputs in (14) by region-specific direct emission intensities gives the generalized MRIO model Thus, the total (direct and indirect) global emissions multiplier can be defined as: ˆd 1 O O I A 11 A 12 A 1R 1 O ˆd 2 O A 21 I A 22 A 2R M O O ˆd R A R1 A R2 I A RR (15) U Temursho (LUA) Consumption-based emissions March / 22

16 Consumption emissions: the MRIO approach Consumption-based emissions of region r according to the MRIO approach cmrio r are derived by post-multiplying the MRIO total emissions multiplier matrix in (15) by the following final consumption vector of region r: That is: y 1r f r y 2r. y Rr (16) c r mrio = Mf r (17) Note that the dimension of cmrio r is (nr) 1 if we assume the same number of sectors in all regions. Therefore, one will have to sum over the regions of emission production first to make the results comparable to the sectoral (n 1) production-based emissions p r of region r. U Temursho (LUA) Consumption-based emissions March / 22

17 Emissions in trade: the MRIO approach The expression for emissions embodied in exports and emissions embodied in imports according to the MRIO approach are more complex, hence will be skipped (see Serrano and Dietzenbacher 2010, p.2226) However, there is no need to compute those if one is interested only in the trade emission balances From the consumption emission definition (i.e. Consumption = Production - Exports + Imports), for each region the responsibility emission balance (Production-Consumption) is again exactly equal to the trade emission balance (Exports - Imports)! U Temursho (LUA) Consumption-based emissions March / 22

18 Differences between the EEBT vs. MRIO methods [T]he EEBT model is more appropriate when analysing bilateral trade relationships and the MRIO method is more appropriate when analysing consumption or global production networks (Peters et al. 2011) Neither method is correct nor incorrect, they just have different method of allocation (Peters 2008, p.16) In terms of policy, since the EEBT model only considers bilateral trade then it is more consistent with bilateral political agreements between countries (Peters 2008, p.17) U Temursho (LUA) Consumption-based emissions March / 22

19 Source: Table 1 in Peters (2008) U Temursho (LUA) Consumption-based emissions March / 22

20 Source: Figure 2 in Davis and Caldeira (2010), MRIO approach, year 2004 U Temursho (LUA) Consumption-based emissions March / 22

21 The issues of uncertainty All the emissions data are uncertain, hence their points estimates should not be taken as unique true value Some believe that consumption-based emissions are more uncertain, especially the MRIO-based ones. The uncertainties have to do with calibration, balancing, and harmonization, the use of different time periods, different currencies, different country classifications, levels of disaggregation, inflation, and raw data errors (Barrett et al. 2013) For a survey of the literature on diverse methods dealing with the (environmental) input-output uncertainty issues, see Temursho (2017) U Temursho (LUA) Consumption-based emissions March / 22

22 Shared responsibility People and firms are inherently interconnected: Households sell their primary inputs to firms, while buy final products from corporations Firms sell their outputs to other corporations and households, from which they buy intermediate and primary inputs Thus, everyone contributes to pollution that is generated due to production and consumption of goods and services Thus, not only producers, but also final demanders and primary inputs providers have to bear the responsibility for generating pollution Various methods for estimating shared responsibility are proposed in the literature; these, however, fall outside the scope of this seminar If interested, for more details and references, see Lenzen and Murray (2010) U Temursho (LUA) Consumption-based emissions March / 22

23 References Barrett, J., G. Peters, T. Wiedmann, K. Scott, M. Lenzen, K. Roelich, and C. L. Qur: 2013, Consumption-based GHG emission accounting: a UK case study. Climate Policy 13(4), Davis, S. J. and K. Caldeira: 2010, Consumption-based accounting of CO2 emissions. Proceedings of the National Academy of Sciences of the United States of America 107, Lenzen, M. and J. Murray: 2010, Conceptualising envirionmental responsibility. Ecological Economics 70(2), Leontief, W. W.: 1986, Input-Output Economics. Oxford: Oxford University Press, 2 edition. Peters, G. P.: 2008, From production-based to consumption-based national emission inventories. Ecological Economics 65(1), Peters, G. P., J. C. Minx, C. L. Weber, and O. Edehofer: 2011, Growth in emission transfers via international trade from 1990 to Proceedings of the National Academy of Sciences of the United States of America 108(21), Serrano, M. and E. Dietzenbacher: 2010, Responsibility and trade emission balances: An evaluation of approaches. Ecological Economics 69(11), Temursho, U.: 2017, Uncertainty treatment in input-output analysis. In: T. ten Raa (ed.): Handbook of Input-Output Analysis. Edward Elgar Publishing Ltd., Chapt. 12. forthcoming. U Temursho (LUA) Consumption-based emissions March / 22