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Analyzing Imports and Consumption using Multiregional Input-Output LCA (MRIO-LCA)
Christopher L. WeberSlides borrowed liberally from Glen P PetersAdvanced LCA4/26/07
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Outline
Background: Household Environmental Impact (HEI)
Model Framework: MRIO-LCA Input-Output Analysis (EEIOA) and
Consumer Expenditure Surveys (CES) Characteristics of ‘Average’ HEI Variation of HEI: Income and Expenditure Sociodemographic Extensions
Uncertainty—quantifiable and unquantifiable
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Previous Work
‘Total Energy Requirements’ and ‘Total HEI’ subject of research since 1979 US, Japan, Australia, EU, individual European
countries General conclusions:
‘Average’ HEI dominated by food, transport, and home energy
Total energy/HEI correlated with expenditure and, to a lesser extent, income
Other sociodemographic factors sometimes important: family size, urbanity, living space, age, etc.
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Previous Work
Several weaknesses: Standard approach doesn’t track imports
Globalization has made volume much larger Shifting trade patterns to developing world
increases intensity Work in US has not looked at distributional
aspects ‘Average’ Household not real: averaged over rich
and poor, large and small, urban and rural, etc Often very aggregated environmental models
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Model Development: Imports in IOA Import
A product that is provided to a domestic resident by a foreign producer
Should include transportation …but this is difficult International transportation network and ownership is
complex “Technology” definitions
A is the total inter-industry requirements (technology) Ad is the inter-industry requirements of domestic
production Aim is the inter-industry requirements of imports
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Math-wise: Imports in IOA
Definitions yd is the domestic final demand on domestic
production yex is the export (foreign) final demand on domestic
production yt = yd + yex is the total final demand on domestic
production yim is the total domestic final demand on imports m is the total imports into the domestic economy y is the total sum of final demand, where imports
are negative: y = yd + yex - m
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Math-wise: Imports in IOA
Want to calculate total output or requirements in US
( )( )
since
d im d e im
d t im im
d t
im im
x Ax y
x A A x y y y m
x A x y A x y m
x A x y
m A x y
= +
= + + + + −
= + + + −
= +
= +
EIO-LCA
Alternative definition
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Math-wise: Imports in IOA
What does this mean? When you run EIO-LCA, the output
includes imports Problematic in two ways
Can’t tell where emissions are occurring (here or in Mexico or China?)
Mexico and China don’t actually have the same technology as us!
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How could we model the economies together? Answer: MRIO-LCA Conceptually, produces a model for final
demand in any country, including trade from all other countries to make that final demand
Start with two regions: 1 = US, 2 = ROW US must produce
Its own final demand y1
Imports to final demand in ROW, y12 (Fords to EU) Imports to industry in ROW, A12 x2 (Intel chips to
China)
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Two-region model
( )( )
1 1 1 1 12 2 12
2 2 2 2 21 1 21
d
d
x A x y A x y
x A x y A x y
= + + +
= + + +
US must produce Its own final demand y1 Imports to final demand in ROW, y12 (Fords to EU) Imports to industry in ROW, A12 x2 (Intel chips to China)
Same idea for ROW
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In matrix notation
1 1 12
2 21 2
1 12
2 21
d
d
x Ax y
x A Ax A
x A A
y yy
y y
= +
⎛ ⎞⎛ ⎞= =⎜ ⎟⎜ ⎟⎝ ⎠ ⎝ ⎠
+⎛ ⎞=⎜ ⎟+⎝ ⎠
Imports into US interindustry demand
Imports into US final demand
US total output
Domestic interindustry demand on domestic production
Domestic final demand on domestic production
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Imports from multiple regions
x=Ax+y
x1 … output of domestic industries due to demand in region 1
x2..m output of industries in foreign countries due to domestic demand
Amn … delivery of products from industries in country m to industries in country n
yn1 … import to final consumption
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Potential Model Simplifications Treat rest-of-world as US Treat exports from US exogenously Assume direct trade dominates
(unidirectional trade assumption)(can be done for all countries or non-US)
Peters, G. and Hertwich, E. Production Factors and Pollution Embodied in Trade: Theoretical Development. NTNU Working Paper 05/2004.
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Case Study: $1000 Computer (1997 prices) Model 5 different ways:
1) EIO-LCA (domestic production assumption) 2) Uni-directional trade 3) Multidirectional trade for US only 4) Full Multidirectional trade (MRIO) 5) Full MRIO + model imports to final demand by
ratio Most computers bought in US not finally produced
(assembled) here!
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Model Results, using market exchange rates (MER)
EIO-LCA Uni, US MultUS MRIO MRIOmixTotal CO2, domestic ? 151 158 158 84CO2, Canada ? 7 7 8 5CO2, Mexico ? 40 40 41 65CO2, China ? 168 169 195 336CO2, Japan ? 12 12 17 28CO2, Korea ? 2 2 3 5CO2, UK ? 1 1 2 2CO2, Germany ? 1 1 5 7CO2, ROW ? 60 61 61 102Total CO2 300 441 451 489 634
Model 1) 2) 3) 4) 5)
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How about total household consumption?
US Input-Output Data (BEA)
US Emissions Data (DOE,EPA)
Environmental Input-Output Model Average HEI
Total HH Final Consumption
Assume imports made with domestic technology—standard assumption
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US Total HEI: 2004 CO2, Dom Model
Total = 5780 Mmt CO2
0 250 500 750 1000 1250 1500 1750 2000
Food/NalcBev
Restaurants,Hotels
AlcBev,Tobacco
PrivateTransport
Housing
Furnish,Equip,Maint
Utilities
Rec/Culture
Mis Goods/Services
Clothing/Footwear
Communications
Health
Education
MT CO2 and $B HH Expenditure
Expend, $B
CO2, mt/yr
Similar ratios to EU, excluding Health
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‘Average’ HEI, Modeling imports
US Input-Output Data (BEA)
US Emissions Data (DOE,EPA)
Foreign Input-Output Data
Trade Data (US Census)
Foreign Emissions Data (Govt Stats, IEA)
Environmental Input-Output Model
7 Foreign Countries
3 Pollutants (CO2, SO2, NOx)
Average HEI
Total HH Final Consumption
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US Total HEI: 2004 CO2 , Int Model
Total = 6680 Mmt CO2 (4830 Domestic, 370 Annex 1, 1490 Non-Annex 1)
0 250 500 750 1000 1250 1500 1750 2000
Food/NalcBev
Restaurants,Hotels
AlcBev,Tobacco
PrivateTransport
Housing
Furnish,Equip,Maint
Utilities
Rec/Culture
Misc Goods/Services
Clothing/Footwear
Communications
Health
Education
MT CO2
Domestic
Ann1
NonAnn1
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CES: Determining Variation and Covariation in HEI
Income and Expenditure
Demographics: Family Size Home Size Urbanity Region of Country
Consumer Expenditure Data (BLS)
Use-phase Emissions Data (EIA)
Use-Phase Model
Micro-HEI
Environmental Input-Output Model
18,000 Households
~400 Commodities
18,000X
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How does HEI vary with income and expenditure? Income vs. Total CO2
y = ax2+bx+cR2 = 0.46
y = axε
R2 ≈ 0.48ε = 0.45Average HEI = 41 mt/hh
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Expenditure vs. Total CO2
y = ax2+bx+c
y = axε
R2 ≈ 0.73
R2 = 0.69
ε = 0.74
Average HEI = 41 mt/hh
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Expenditure and Family Size by CO2 by Category
0
20
40
60
80
$0 $20,000 $40,000 $60,000 $80,000 $100,000Yearly Expenditure, $/yr
CO2 footprint, mt/yr
Housing
Education
Health
AlcBev,Tobacco
Communications
Clothing/Footwear
Misc Goods/Serv
Rec/Culture
Utilities
Restaurants,Hotels
Furnish,Equip,Maint
PrivateTransport
Food/NalcBev
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Total and Domestic/International Shares
0.00
0.10
0.20
0.30
0.40
$0 $25,000 $50,000 $75,000 $100,000
Yearly Expenditure, $/yr
International Share, IntCO2/TotCO2
5th
25th
50th
75th
95th
HEI Expend/Inc R2
Total Expenditure 0.69Domestic Expenditure 0.61International Expenditure 0.54Total Income 0.46Domestic Income 0.44International Income 0.31
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Modeling Uncertainties—difficult to quantify Static technology assumption Production functions Emissions intensities
Price variations Within sectors Between regions and years (deflation)
Currency conversion issues and Rest of World
Aggregation error in input-output accounts Survey Error: recall error, cognitive biases
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Quantifiable uncertainty Issues Does weighted CES capture most total
household expenditure?
0 200 400 600 800 1000 1200 1400 1600 1800
Food/NalcBev*
Restaurants,Hotels
AlcBev,Tobacco
PrivateTransport
Housing
Furnishings,HHEquip,Maint
Utilities
Rec/Culture
Mis Goods/Services
Clothing/Footwear
Communications
Health
Education
Total US HEI, mt CO2/yr
IOA
CES
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Policy implications In general, several ways to reduce CO2 emissions
Production-side efficiences (CO2/GDP) Change mix of production (International Trade) Decrease overall consumption (lower aggregate GDP) Change mix of consumption (less CO2-intensive
consumption) 1st obviously important but may not be enough 3rd politically infeasible 2nd problematic for international climate policy 4th has warranted attention but not tried much
yet
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Policies for changing consumption Most often cited: carbon/CO2 taxes
Large variation among households shows promise Regressivity a major issue for direct carbon
taxes Depends on implementation—“total” C tax better?
Rebound effect? Fixing regressivity may reduce tax efficiency!
International trade issues Increasing foreign portion with income—
regressive? Difficult to ascertain answers with these
methods
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Future work
Incorporating international transport Quantifying income rebound effects Education and information transfer—
what is effective?
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Acknowledgements
Funding: EPA STAR fellowship program
Advisors: Prof. H. Scott Matthews
Thanks to help from several students in EPP, CEE, and the Green Design Institute