Accounting for Global Carbon Emission Chains
From Global Sustainability Accounting—Developing EXIOBASE for Multi-Regional Footprint Analysis
Perish or prosper? Human development must occur without overwhelming the natural ecosystems that we depend on. Sustainable development is now a constant focus of policy development, and sustainability metrics are becoming centralized within statistics. Models are continuously being developed to better inform policy processes while databases are being increasingly refined to provide the most complete and coherent description of society. To this end, focus has been applied on developing internationally applicable concepts within the United Nations framework for harmonizing economic and environmental accounting  so that we have global coverage and comparability between sustainability indicators. Significant progress has been made to harmonize the economic and environmental accounting principles with the System of Environmental-Economic Accounting (SEEA). We describe here the efforts made to operationalize a global-integrated accounting framework within the SEEA guidelines. The work focuses on the practicalities of implementing SEEA guidelines for data gathering, the amelioration of approaches for allocating supply chain impacts, and the demonstration of global impacts across the production and consumption perspectives.
There are two approaches in accounting for GHG emissions.
- Production based Accounting
- Consumption based Accounting
The relationship between production- and consumption-based emissions is ‘consumption- based emissions = production-based emissions – emissions embodied in exports + emissions embodied in imports’.
From Consumption-based emission accounting for Chinese cities
At present, few governments choose consumption-based accounting in determining their mitigation policies, and most global climate change agreements are based on production-based accounting, including the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol. Consumption-based accounting’s advantages have been shown in many studies; this approach elucidates the drivers of emissions growth, improves cost-effectiveness and justice, addresses carbon leakage, promotes environmental comparative advantages, and encourages technology diffusion [13,22,26,40]. There are substantial differences between production- and consumption-based accounting in terms of calculating both overall and per capita carbon emissions levels. As a result, the selection of an emission accounting approach has a major influence on the allocation of responsibilities for climate change mitigation. The two different accounting approaches must thus be considered comprehensively to identify fair mitigation policies. At the city level, consumption- based accounting can help cities to reduce emissions both within city boundaries and along their entire supply chains at minimum cost. Interregional cooperation on climate change mitigation should employ consumption-based accounting to allocate mitigation responsibilities more fairly and efficiently. Therefore, consumption-based carbon emission accounting is a complementary tool for promoting climate action at the city level.
From Counting CO2 emissions in a globalised world
The main conclusions from this paper are:
- Comprehensive carbon trade balances with embedded emissions show that emissions related to domestic consumption of products are significantly higher than those related to domestic production in many industrialised countries. The opposite is revealed for trade engaged developing and emerging economies.
- Consumption-based carbon trade balances should be established in addition to productionbased balances because they can help in finding solutions to issues such as carbon leakage and emission targets for developing countries.
Background and methodology
2.1 Approaches to carbon accounting
The most commonly used method for CO2 accounting – production-based or territorial accounting – measures the CO2 emitted within a country. While it can be used to evaluate the global environmental impacts of the production and consumption activities of a specific country, it cannot identify shifts of environmental pressures as a result of changing global production, trade and consumption patterns. Moreover, it is not possible to use this approach to analyse carbon leakage or equity concerns related to the structure of trade relations between developing and industrialised countries (Schaeffer / Leal de Sá 1996).
By contrast, consumption-based emissions are calculated by adding the emissions arising from domestic production and emissions embodied in imports and subtracting the emissions embodied in exports (Nakano et al. 2009). Allocating emissions on a national production basis is easier than calculating them on a consumption basis because the latter requires the detailed specification of inter-industry and international trade structures. The calculation of emissions from the production of exports furthermore requires large quantities of country-specific, up- to-date data (in the form of so-called input-output tables and international trade data). Territo- rial accounting, by contrast, has clear system boundaries and good data availability.
The choice between the production and consumption accounting principle implies an inherent judgment on whether the producer or the consumer is responsible for the CO2 emissions.
2.2 Models for economy-wide carbon accounting
The most commonly used methodology to estimate embodied emissions in international trade and identify all direct and indirect effects of production is based on the analysis of input- output (IO) tables. Input-output tables express the structure of an economy in terms of the inputs to its various sectors and the nature of the outputs from those sectors. They can be used to investigate what an economy extracts from and introduces into the natural environment as well as the environmental implications of resource use of final consumption (Leontief / Ford 1970; Miller / Blair 1985; Walter 1973). Environmentally extended input-output analysis can be used to analyse the environmental effects of structural changes in the economy, such as technology, trade, investment and consumption.
There are two kinds of input-output-based approaches – Single-Region Input-Output (SRIO) models and Multi-Regional Input-Output (MRIO) models.4 As supply chains have become increasingly global over the past decades, MRIO models have gained in importance in meas- uring emissions embodied in trade. A multi-regional input-output model includes all trade linkages between regions and shows how many domestic and imported products are required from each sector in each region. The main advantages of the MRIO approach are:
- MRIO models enable an accurate and comprehensive evaluation of the environmental impacts embedded in trade because they link (monetary) trade flows and environmental databases, taking variations in production structures and technologies between different countries and world regions into account (Wiedmann et al. 2007a).
- MRIO models can be used to conduct different analyses at the international level, such as structural path analysis, production layer composition, quantification of shared environ- mental responsibilities between producers and consumers of goods (Wiedmann et al. 2007a; Wiedmann et al. 2007b).
- MRIO models can help to capture direct, indirect and induced effects of international trade (Wiedmann et al. 2007a).
In recent years, complex multi-regional multi-sectoral input-output models have been used to identify the environmental pressures that occur along the international supply chains of products (Ahmad / Wyckoff 2003; Peters / Hertwich 2004).5 The latest studies to calculate embodied CO2 emissions which distinguish a large number of countries and regions, based on the Global Trade Analysis Project (GTAP) database, include Peters and Hertwich (2008b) and Minx et al. (2008).
From GLOBAL MULTIREGIONAL INPUT–OUTPUT FRAMEWORKS: AN INTRODUCTION AND OUTLOOK
For more information, see these links.
- Global Trade Network
- MFA ( Material Flow Accounting)
- GRAM (Global Resource Accounting Model)
- SUT Supply and Use Tables
- Global Carbon Footprint
- Trade Balance
- Emissions Trade Balance
- EEIO (Environmentally Extended Input Output)
- Production based Accounting
- Consumption based Accounting
- World Resources Institute (WRI)
- World Business Council for Sustainable Development (WBCSD)
Key Sources of Research:
A review of recent multi-region input–output models used for consumption-based emission and resource accounting
Available online 15 September 2009
ALLOCATING CARBON EMISSIONS AND RAW MATERIALS TO FINAL CONSUMPTION USING A MULTI-REGIONAL INPUT-OUTPUT MODEL
KIRSTEN S. WIEBE AND CHRISTIAN LUTZ
CO2 emissions production-based accounting vs consumption: Insights from the WIOD databases
Version April 2012
Consumption-based GHG emission accounting: a UK case study
JOHN BARRETT1*, GLEN PETERS2, THOMAS WIEDMANN3, KATE SCOTT1, MANFRED LENZEN4, KATY ROELICH1, CORINNE LE QUE ́RE ́5
Consumption-based carbon accounting: does it have a future?
16 November 2016
The carbon content of trade:
Under border tariff adjustments and a global carbon regime
Matthias Weitzel×, Sonja Peterson; Kiel Institute for the World Economy
Production-based versus consumption-based emission targets: implications for developing and developed economies
Madanmohan Ghosh (a1) and Manmohan Agarwal
Growth in emission transfers via international trade from 1990 to 2008
Glen P. Petersa,1, Jan C. Minxb,c, Christopher L. Weberd,e, and Ottmar Edenhofer
Carbon Emissions and Economic Growth: Production-based versus Consumption-based Evidence on Decoupling
Goher-Ur-Rehman Mir1 and Servaas Storm
A Consumption-Based Approach to Carbon Emission Accounting – Sectoral Differences and Environmental Benefits –
Zsófia Vetőné Mózner
Consumption-based accounting of CO2 emissions
Steven J. Davis1 and Ken Caldeira
Accounting for carbon dioxide emissions: A matter of time
Ken Caldeira1 and Steven J. Davis
CO2 Embodied in International Trade with Implications for Global Climate Policy
GLEN P. PETERS AND EDGAR G. HERTWICH
Multiregional Input-Output Database
25 JUNE 2010
Edgar G. Hertwich1 and Glen P. Peters
Consumption-based Material Flow Accounting
Austrian Trade and Consumption in Raw Material Equivalents 1995–2007
Anke Schaffartzik, Nina Eisenmenger, Fridolin Krausmann, and Helga Weisz
Consumption-based emission accounting for
The Carbon City Index (CCI): A Consumption Based, Regional Input-Output Analysis of Carbon Emissions
Consumption-based Accounting of U.S. CO2 Emissions from 1990 to 2010
March 30, 2016
GLOBAL MULTIREGIONAL INPUT–OUTPUT FRAMEWORKS: AN INTRODUCTION AND
Arnold Tukker & Erik Dietzenbacher
Policies and Consumption-Based Carbon Emissions from a Top-Down and a Bottom-Up Perspective
Kirsten S. Wiebe, Simon Gandy, Christian Lutz
Counting CO2 emissions in a globalised world
Producer versus consumer-oriented methods for CO2 accounting
Martin Bruckner Christine Polzin Stefan Giljum
The supply chain of CO2 emissions
Steven J. Davisa,1, Glen P. Petersb, and Ken Caldeira
Global environmental footprints
A guide to estimating, interpreting and using consumption-based accounts of resource use and environmental impacts
Glen P. Peters, Robbie M. Andrew and Jonas Karstensen
INPUT–OUTPUT ANALYSIS AND CARBON FOOTPRINTING: AN OVERVIEW OF APPLICATIONS
J.C. Minx a b , T. Wiedmann , R. Wood , G.P. Peters , M. Lenzen , A. Owen , K.
Scott , J. Barrett , K. Hubacek , G. Baiocchi , A. Paul , E. Dawkins , J. Briggs ,
D. Guan , S. Suh & F. Ackerman
Consumption-based carbon emissions
What Accounts for the Growth of Carbon Dioxide Emissions in Advanced and Emerging Economies? The Role of Consumption, Technology, and Global Supply Chain Trade
Benno Ferrarini and Gaaitzen J. de Vries
TOWARDS A COMPREHENSIVE AND FULLY INTEGRATED STOCK AND FLOW FRAMEWORK FOR CARBON ACCOUNTING IN AUSTRALIA
JUDITH AJANI AND PETER COMISARI
System of Environmental Economic Accounting (SEEA)
Institute for Development of Environmental Economic Accounting (IDEEA)