Environmental Impact

Definition

Environmental Impact (or Environmental Stressor) in the context of an Input-Output Model denotes an extension of the basic IO model via a system of satellite accounts that provides insights into the environmental footprint of economic activities.

Approach

Each MRIO's environmental consumption-based accounts (CBA) result can be understood as a product of three variables:

• a flow (transactions) matrix Z describing the economic structure between various production sectors
• an environmental stressors matrix (or ‘satellite account’) F describing the per-sector direct environmental impacts of production
• a consumption bundle Y describing the composition of final consumption (Final Demand).

The total footprint C is a function of these three variables: $C = f (F, Z, Y)$.

Formula

$\begin{align} C & = F \times (I - A)^{-1} \times Y \end{align}$

where:

• $F$ is a vector of impact intensities per sector
• $C$ is the total impact for given final demand Y

Further Resources

• Crash Course on Input-Output Model Mathematics
• Introduction to Input-Output Models using Python