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 activity

Approach

Each MRIO's environmental CBA result can be understood simplistically as a product of three variables:

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

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

In addition to the output effects, implications can be derived for the value-added components and the satellite systems. Various production-induced effects can be calculated by multiplying with the coefficients s

Formula

$\begin{align} s_{j} & = b_{j} \times (I - A)^{-1} \times y \end{align}$

where

• $s_{j}$ Vector of specific satellite accounts
• $bs_{ij}$ Vector of coefficients for satellites.

Further Resources

• Crash Course on Input-Output Model Mathematics