Environmental Input-Output Model

From Open Risk Manual

Definition

An Environmental Input-Output Model (EEIO or EE-MRIO) is a type of Generalized Input-Output Analysis that augments the basic Input-Output Model with additional datasets and/or modeling assumptions in order to provide insights into the the environmental foortprint of economic activity with an emphasis in associated externalities.

EE MRIO analysis is a well-established method in the fields of applied economics and Industrial Ecology to analyze global value chains as well as in environmental economics for the calculation of the environmental footprints of specific agents (e.g. the global greenhouse gas footprint caused by the household consumption in a specific country).

Structure

Environmentally extended multi-regional input-output (EE MRIO) tables contain data that describe the complex net of global economic relationships and their environmental consequences. They are particularly suited to the analysis of global supply-chain-related environmental pressures.

Environmental extension of MRIO models can be done in several ways:

  • by augmenting the Technical Coefficient Matrix with additional rows and/or columns reflecting environmental impacts or
  • by including additional ecosystem sectors where flows between these sectors and economic sectors are recorded along the lines.


Whichever method is used, EE-MRIO models often mix physical and monetary units as pollutants emissions and volumes of raw materials sourced are linked to the monetary value of production.

Various EE-MRIO databases have been constructed to depict the global supply chains and the environmental impacts of production in the various countries.

In short, while MRIO models provide a mathematical representation of the flows of goods and services between industries all over the world by documenting the monetary transactions involved in production and consumption, EE-MRIO models are appropriate for analysing the supply-chain-related environmental pressures due to production and consumption activities.

Usage

Environmental - and social - extensions allow the comprehensive examination of a wide variety of factors - employment, pollution, water, capital expenditures, etc. - associated to economic activities and policies.

Environmentally extended multi-regional input-output models are used today to compute climate, water and material resources footprints of production and consumption at national or regional levels.

In EE-MRIO models, companies’ purchases, commodity extraction and emissions are spatially explicit, so that complex international value chains can be analysed.

Examples

For example, output from the footwear manufacturing sector results in economic activity in associated sectors from cattle ranching to accounting services.

Issues and Challenges

  • The sourcing and integration of trade data, both multi and uni-directional, into consumption-based carbon accounting methods resulting in greater complexity

See Also

References

  • Natural Capital Coalition (2016)