Estimation of CO2 emission reduction and economic impacts of ICT services

using AIM/CGE [Japan]

Machiko Shinozuka, Xiaoxi Zhang, Yuriko Tanaka 1Yuko Kanamori, Toshihiko Masui 2

1: Nippon Telegraph and Telephone Corporation2: National Institute for Environmental Studies

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• Introduction– ICTs’ impact on environment

• Purpose• Estimation of ICT’s direct effect

– How to define direct impact in AIM/CGE– Results & Discussion

• Estimation of ICT’s rebound effect– How to define rebound effect in AIM/CGE– Results & Discussion

• Summary

Outline

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ICT’s contribution to climate change

Use of ICT

Contribute to tackling climate change by promoting wider use of ICTK. Fujinuma from MIC: “Japan’s ICT & Climate Change Policies and Actions”, Virtual

International Symposium on ICTs and Climate Change, 23rd Sept. 2009. 3

• On the other hand, saved cost and time by ICT use may induce additional consumption and GHG emission, which is called rebound effect.

First-order rebound effect

Before ICT use (commuting) ICT use (telework)

・Travel cost and time will be saved.⇒What will we use for that cost and time for?ーTV watching? House work?

⇒Additional CO2 emissions

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• There is further impact of ICT use on macro economy and environment.– Production efficient improvement and additional consumption by ICT use causes shift in

demand and supply of goods.– Such shift influence on CO2 emission.

• However, few existing studies focused on these macro impact of ICT use.

Further impact of ICT on economy and environment

Markets

industry

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• Grasp changes in demand and supply of goods induced by ICT use

• Estimate impact of ICT use on environment and economy in Japan

Purpose of this study

AIM/CGE [Japan] was adopted.

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• Effects of ICT was described as changes in input-output parameter and final-demand amount in AIM/CGE.

Overview of estimation method

Changes of input-output coefficient

AIM/CGE [Japan] Changes in the amount of demand for goods in final-demand sector

Saved cost and time by ICT use

ICT penetration scenario

GHG emissions and GDP

What are the saved cost and time used for

Direct effect

Rebound effect

Based on 2013 data

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Rebound effect means “first-order rebound effect.”

• Input-output tables of 2005 was used as the base data of AIM/CGE.• ICT was introduced in producing sector and final demand sector.

Structure of AIM/CGE[Japan]

ICT services

ICT services

Overseas sector

EnergyCO2

Producing sector

Raw materialfor production

LaborCapital

Final demandEnergy final demand

CO2 Trade balance

TradeProduced

goods and services

Market

Final demand sector

Companies maximize profits on the basis of production technology.

Households maximize utility under income constraints.

Supply and demand are kept in equilibrium by price mechanism for each good and production factor.

Demand > Supply → Price UPDemand < Supply → Price DOWN

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Evaluation targeted ICT services

Fields No. ICT services

FinanceA_1 Online banking

A_2 Electronic bond

Public B_1 Electronic bidding

Telecommunication

C_1 Telework

C_2 Teleconferencing

C_3 Remote management

Manufacture

D_1 Supply-chain management

D_2 Matching service for re-use of used-car parts

D_3 Matching service for re-use of industrial machinery

D_4 Matching service for re-use of construction machinery

D_5 Matching service for re-use of computers

Fields No. ICT services

Distribution and

Service

E_1 Online shopping

E_2 Online-issuing of air tickets

E_3 Internet services at convenience stores

E_4 B to B e-commerce

E_5 Digital music contents

E_6 Digital video

E_7 PC software

E_8 Digital books

Medical care F_1 Electronic medical records

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Direct effects of each ICT service

ICT services Direct effects

A_1 Online banking Reduction of transportation use; reduction of teller windows in banks

A_2 Electronic bond Reduction of physically transporting bondsB_1 Electronic bidding Reduction of transportation useC_1 Telework Reduction of transportation use; reduction of office use

C_2 Teleconferencing Reduction of transportation useC_3 Remote management Reduction of transportation useD_1 Supply-chain management

(SCM)Suppression of overproduction; optimization of intermediate distribution and retail sales; reduction of factory and storage space

D_2 Matching service for re-useof used-car parts

Reduction of resource use; reduction of office use; reduction of waste

D_3 Matching service for re-useof industrial machinery

Reduction of resource use; reduction of office use; reduction of waste

D_4 Matching service for re-useof construction machinery

Reduction of resource use; reduction of office use; reduction of waste

D_5 Matching service for re-useof computers

Reduction of resource use; reduction of office use; reduction of waste

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Direct effects of each ICT service

ICT services Direct effects

E_1 B to C e-commerce

Optimization of intermediate distribution and retail sales; increase of inventory space at net-retailers and goods distributed by parcel delivery; suppression of overproduction; reduction in volume of returned goods

E_2 Online-issuing of air tickets Reduction of transportation use

E_3 Purchase of tickets at convenience stores Reduction of transportation use

E_4 B to B e-commerce Reduction of transportation use; optimization of accounting works

E_5 Digital music contentsOptimization of intermediate distribution and retail sales; unnecessity of storage space and retail shops; reduction in producing CDs; reduction in sales distribution and returned goods delivery

E_6 Digital videoOptimization of intermediate distribution and retail sales; unnecessity of storage space and retail shops; reduction in producing DVDs; reduction in sales distribution and returned goods delivery

E_7 PC softwareOptimization of intermediate distribution and retail sales; unnecessity of storage space and retail shops; reduction in producing DVDs; reduction in sales distribution and returned goods delivery

E_8 Digital booksOptimization of intermediate distribution and retail sales; unnecessity of storage space and retail shops; reduction in producing newspapers and books; reduction in sales distribution and returned goods delivery

F_1 Electronic medical records Reduction of paper

• Telework reduces transportation and energy use in office.

How to define direct effect of ICT in AIM/CGE

Direct effect• Reduction of transportation

Decrease in input-output coefficient of transportation in the sectors introducing telework

Decrease in the demand of fuel and transportation in final-demand sector

• Reduction of energy use in office Decrease in input-output coefficient of energies in the

sectors introducing telework

Commuting

Telework

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CO2emission

• CO2 emission is estimated to be decreased by 6.95Mt-CO2 due to direct effects.• CO2 emission /GDP: 2.58⇒2.52 Mt-CO2.

CO2 emission change due to direct effects

1292 1294 1296 1298 1300 1302 1304 1306 1308Actual CO2 emissions in Japan in 2005

Introductions of all targeted ICT servicesA_1 Online banking

A_2 Electronic bondB_1 Electronic bidding

C_1 TeleworkC_2 Teleconferencing

C_3 Remote managementD_1 SCM

D_2 Used-car partsD_3 Industrial machinery

D_4 Construction machineryD_5 Computers

E_1 Online shoppingE_2 Online-issuing of air tickets

E_3 Internet services at convenience storesE_4 B to B e-commerce

E_5 Digital music contentsE_6 Digital videoE_7 PC software

E_8 Digital booksF_1 Electronic medical records

[Unit: Mt-CO2]

Decreased by 6.95Mt-CO2

13T. Origuchi,, M. Shinozuka et al., Ecodesign 2017

• ICT services reducing transportation and energy use most contributed to CO2emission reduction.

CO2 emission change due to direct effects

1292 1294 1296 1298 1300 1302 1304 1306 1308Actual CO2 emissions in Japan in 2005

Introductions of all targeted ICT servicesA_1 Online banking

A_2 Electronic bondB_1 Electronic bidding

C_1 TeleworkC_2 Teleconferencing

C_3 Remote managementD_1 SCM

D_2 Used-car partsD_3 Industrial machinery

D_4 Construction machineryD_5 Computers

E_1 Online shoppingE_2 Online-issuing of air tickets

E_3 Internet services at convenience storesE_4 B to B e-commerce

E_5 Digital music contentsE_6 Digital videoE_7 PC software

E_8 Digital booksF_1 Electronic medical records

[Unit: Mt-CO2]

14T. Origuchi,, M. Shinozuka et al., Ecodesign 2017

• GDP is estimated to be increased by \10.6 trillion due to direct effects of ICTs.• ICT services improving production, distribution, and operations efficiency most contributed to

GDP growth. • These services enabled industries to produce with less material and cost, and increased in

output.

GDP changes due to direct effects

490 495 500 505 510 515Actual GDP in Japan in 2005

Introductions of all targeted ICT servicesA_1 Online banking

A_2 Electronic bondB_1 Electronic bidding

C_1 TeleworkC_2 Teleconferencing

C_3 Remote managementD_1 SCM

D_2 Used-car partsD_3 Industrial machinery

D_4 Construction machineryD_5 Computers

E_1 Online shoppingE_2 Online-issuing of air tickets

E_3 Internet services at convenience storesE_4 B to B e-commerce

E_5 Digital music contentsE_6 Digital videoE_7 PC software

E_8 Digital booksF_1 Electronic medical records

[Unit: Trillion yen]

Increased by \10.6 trillion

15T. Origuchi,, M. Shinozuka et al., Ecodesign 2017

• Effects of ICT was defined as changes in input-output parameter and final-demand amount in AIM/CGE.

Overview of estimation method

Changes of input-output coefficient

AIM/CGE [Japan] Changes in the amount of demand for goods in final-demand sector

Saved cost and time by ICT use

ICT penetration scenario

GHG emissions and GDP

What are the saved cost and time used for

Direct effect

Rebound effect

Based on 2013 data

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• Assumed that additional consumption would be generated by saving time and cost for transportation.

• To estimate including rebound effect, additional consumption was defined as increase in final demand amount based on users’ questionnaire.

How to define rebound effect in AIM/CGE

How much cost and time saved by using telework system instead of commuting?

What do you want use the saved cost and time for?1. sleep, 2. shopping, 3. hobby…

Setting correspondence between consumption item and commodity

Increase in final demand of personal service Increase in final demand of transportation・・・

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• CO2 emission changed by 0.001-0.01Mt-CO2 when including rebound effect.• CO2 emission change may depend on additional consumption.

Shopping may lead increase CO2 emission. Hobby, sleep may lead decrease CO2 emission.

CO2 emission change including rebound effect

ICT service CO2 emission including onlydirect effect

CO2 emission including rebound effect

CO2 emission change by rebound effect

C_1 Telework 1302.093 1302.094 +0.001

E_1 Online shopping 1305.944 1305.945 +0.001

E_5 Digital music contents

1305.958 1305.943 -0.015

Users spent a lot of saved cost and time for hobby, sleep.

Users spent a lot of saved cost and time for shopping or house work.

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• In order to estimate macro impact of ICT use on environmental impact including changes in the supply and demand of goods, AIM/CGE[Japan] was used. GHG emission is estimated to be reduced 6.95Mt-CO2 due to direct effect. GDP increased by \10.6 trillion ($98 million) due to direct effect. Including rebound effect, further change of GHG emission depended on additional

consumption using saved cost and time.

• ICT may contribute to both CO2 emission reduction and economic growth. Penetration of ICT services that contribute to improving production, distribution, and

operations efficiency, and reduction in transportation and energy use will lead to decoupling of economic growth and CO2 emissions.

• How to avoid rebound effects focusing on lifestyle changes due to ICT will be further studied.

Summary

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Thank you!

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