Examining the global environmental impact of regional consumption activities — Part 2: Review of input-output models for the assessment of environmental impacts embodied in trade

This paper offers a detailed review of recently described single- and multi-region input-output models used to assess environmental impacts of internationally traded goods and services. It is the second part of a two-part contribution. In Part 1 [Turner, K., Lenzen, M., Wiedmann, T. and Barrett, J. in press. Examining the Global Environmental Impact of Regional Consumption Activities — Part 1: A Technical Note on Combining Input-Output and Ecological Footprint Analysis; Ecological Economics.] we describe how to enumerate the resource and pollution content of inter-regional and inter-national trade flows with the aim to illustrate an ideal accounting and modelling framework for the estimation of Ecological Footprints.A large number of such environment-economic models have been described but only in the last few years models have emerged that use a more sophisticated multi-region, multi-sector input-output framework. This has been made possible through improvements in data availability and quality as well as computability. We identify six major models that employ multi-sector, multi-region input-output analysis in order to calculate environmental impacts embodied in international trade. Results from the reviewed studies demonstrate that it is important to explicitly consider the production recipe, land and energy use as well as emissions in a multi-region, multi-sector and multi-directional trade model with global coverage and detailed sector disaggregation. Only then reliable figures for indicators of impacts embodied in trade, such as the Ecological Footprint, can be derived.     

A first empirical comparison of energy Footprints embodied in trade — MRIO versus PLUM

The Ecological Footprint as an indicator that accounts for human demand on global bioproductivity sets out to quantify the impacts associated with consumption in a given country, including the impacts associated with trade. The National Footprint Accounts (NFA) by Global Footprint Network (GFN) calculate trade-embodied Footprints by multiplying yield and embodied energy factors with mass volumes of traded goods in a “Product Land Use Matrix (PLUM)”. This article compares energy Footprints embodied in trade from and to the United Kingdom in 2002 as calculated by the NFA-PLUM with the results from a recently developed multi-region input-output model (MRIO) for the UK. Although totals for imports and exports are comparable, breaking down the results by economic sectors reveals large differences and hardly any correlation between the two methods. The omission of trade in services (especially transport services) and upstream impacts of energy goods (fossil fuels) and the use of inappropriate embodied energy factors in the NFA-PLUM method are identified as the main reasons for these differences.In the light of the results it seems that a comprehensive Footprint account of trade can better be achieved with an input-output based approach. I conclude that MRIO models - once fully developed - will be particularly suitable in the future to estimate the Ecological Footprints of imports and exports of nations with the possibility to track their origin via inter-industry linkages, international supply chains and multi-national trade flows.     

Evaluating the effects of embodied energy in international trade on ecological footprint in China

Based on sub-sectoral level of economy and detailed traded items, embodied energy (EE) in international trade flow in China is estimated during 1996-2004, and the effects of EE on sustainability are quantified by using one of the most popular indicators—Ecological footprint (EF). A framework of EF method, which is more relevant to realism of specific country, is proposed in this paper. The results show that China is a net importer of EE during the period covered by this study except for the year from 1997 to 1999. Imported, Exported and Net imported EE tends to increase sharply along time series. Net imported energy would increase 38% and energy consumption would increase 2.8% in 2004 if EE were taken into account. Footprint_energy is the most important part of EF components and is significantly affected by EE, and the effects of EE on EF are similar to that of Footprint_energy. Footprint_energy, EF and ecological deficit of 2004 will be underestimated about 2.92%, 1.36%, 2.83%, res pectively, if EE is not taken into the national energy budget. Continuous increase of EF and ecological deficit along time series indicates that China is moving away from sustainability. 1.47 times Chinese territories are accurately occupied by China in 1996 while 1.71 times in 2004. Obviously unsustainability procedure of China is accelerated by EE. The contribution of EE to EF and ecological deficit is small in absolute terms expressed in per capita, but the effects on whole nation are huge if the population of China multiplies them. To curb the increase of EF and ecological deficit and to achieve the goal of sustainability, some policy and measures are also proposed.     

A review of recent multi-region input-output models used for consumption-based emission and resource accounting

The interest in consumption-based emission and resource accounting has grown significantly. Many studies juxtapose consumer emissions (carbon footprint) and producer (territorial) emissions of greenhouse gases in order to demonstrate the effects of trade on the national emission budget. To this end, a respectable number of studies have been undertaken worldwide in order to estimate emissions embedded in international trade of numerous countries and world regions. Input-output approaches, and increasingly multi-region input-output (MRIO) models, are commonly chosen as they provide an appropriate methodological framework for complete carbon footprint estimates at the national and supra-national level. With increasing processing capabilities of computers and a wider availability of economic accounts, environmental accounts and trade data such models are now being implemented on a wide scale.After a brief overview of salient single-region input-output studies I provide an in-depth review of the most recent multi-region input-output models used for the purpose of consumption-based environmental accounting. The main methodological features and important results are described for around twenty studies covering the years 2007 to 2009. This is followed by a detailed review of studies dealing with uncertainty in MRIO analysis, an area which has not received a lot of attention so far. I conclude that further research is mainly needed in two areas, a) improvements in data availability and quality and b) improvements in the accuracy of MRIO modelling.     

Relating the environmental impact of consumption to household expenditures: An input-output analysis

In this paper we evaluate the relationships between household expenditures and the environmental impact categories climate change, acidification, eutrophication and smog formation, by combining household expenditures with environmentally extended input-output analysis. Expenditure elasticities are examined with regression analysis, and are compared and interpreted on the basis of insight at the product level. With data from the Netherlands in the year 2000, we find that environmental impact increases with increasing household expenditures, although the degree to which the environmental impact increases differs per impact category. Climate change and eutrophication increase less than proportionally with increasing expenditures. Acidification increases nearly proportionally with increasing expenditures, whereas smog formation increases more than proportionally. It appears that the mix of necessities and luxuries to which an environmental impact is related is essential in explaining the relationship.     

Taking the “U” out of Kuznets: A comprehensive analysis of the EKC and environmental degradation

Unlike most Environmental Kuznets Curve (EKC) studies which focus on narrow measures of pollution as proxies for environmental quality, we test the validity of the EKC using the Ecological Footprint (EF), a more comprehensive measure of environmental degradation. We find no empirical evidence of an EKC relationship between the EF and economic development, and only limited support for such a relationship among the components of the EF. In addition, we discover that energy is largely responsible for the lack of an EKC relationship, and that energy consumption levels would have to be cut by over 50% in order for a statistically significant EKC relationship to emerge from the data. Overall, these results suggest that growth alone will not lead to sustainable development.     

The CO2 ‘trade balance’ between Scotland and the rest of the UK: Performing a multi-region environmental input–output analysis with limited data

In this paper we attempt an empirical application of the multi-region input–output (MRIO) method proposed by Turner, Lenzen, Wiedmann and Barrett [Turner, K., Lenzen, M., Wiedmann, T., Barrett, J., 2007. Examining the global environmental impact of regional consumption activities — part 1: a technical note on combining input–output and ecological footprint analysis. Ecological Economics 62 (1), 37–44] in a recent issue of this journal in order to enumerate the CO2 pollution content of interregional trade flows between Scotland and the rest of the UK (RUK). We extend the analysis to account for direct emissions generation by households, as final consumers, and to a social accounting matrix (SAM), where a more comprehensive account of incomes and expenditures is possible. While the existence of significant data problems mean that the quantitative results of this study should be regarded as provisional, the interregional economy-environment IO and SAM framework for Scotland and RUK allows an illustrative analysis of some very important issues in terms of the nature and significance of interregional environmental spillovers within the UK and the existence of a CO₂ ‘trade balance’ between Scotland and RUK.