G LOBAL I NTEGRATION AND C ARBON F LOW IN EU AND R EST OF THE W ORLD - - PowerPoint PPT Presentation

GLOBAL INTEGRATION AND CARBON FLOW IN EU AND REST OF THE WORLD: A 2-REGIONAL INPUT-OUTPUT FRAMEWORK

Amarendra Sahoo, Arjan de Koning, Reinout Heijungs Institute of Environmental Sciences (CML) Leiden University

We appraise carbon flows for EU and ROW due to inter-regional consumptions and productions interdependencies.

• Domestic

production (producer’s responsibility)

• Consumption (consumer’s responsibility)
• Consumer’s

responsibility when consumption is internalized to generate induced effect

• A two-regional IO multiplier analysis with

different scenario settings

DATA BASE

 EXIOBASE data base on supply-use table for the

year 2000.

 43 countries and one rest of the world.  129 x 129 industry sectors each for EU and ROW.  Environmental and material extensions for.

METHODOLOGY

Carbon flow is evaluated with the help of fossil carbon contents and the Leontief multipliers. Fossil carbon content of product groups is calculated on the basis of mass balance approach along with IO transaction matrix (Heijungs et al, 2012).

An activity requires products as well as

environmental extraction, e.g. crude oil, gas

• etc. for its use and may have emissions

containing fossil carbons, e.g. CO2, CO and CH4.

CARBON CONTENT OF A PRODUCT: MASS

BALANCE APPROACH

Product 1

Environment al extraction Carbon product inputs Emissions to environment Carbon product supply

Product 2

Carbon product supply Emissions to environment

EU ROW Industry x Industry Industry x Industry Coal and lignite, peat 18257038 19284233 Crude petroleum 4099526 508621 Natural gas 3970953 7123296 Other petroleum, gaseous materials 1488240 1484728 Coke oven products 6079870 2552079 Motor spirit (gasoline) 2901028 3047804 Kerosene, kerosene type jet fuel 25530933 1484756 Gas oils 2668794 2557002 Fuel oils n.e.c. 2003605 2465284 Petroleum gases, other gaseous 2529451 2533838 Other petroleum products 842318 1925405 Chemicals, chemical products 100731 144853 Manufacture of gas; distribution of gaseous fuels 1490456 2015885 Retail sale of automotive fuel 23702 9964

Carbons contents of products( Kg C/Million Euro) Source: Heijungs et al. (2012)

METHODOLOGY(CONTD.)

Carbon contents are calculated by combining monetary input-output transaction matrix along with physical satellite account containing emissions and resource uses, and carbon contents of the environmental extensions. We Calculate carbon flows applying the carbon contents on IO transaction matrix for EU and

• ROW. Two-regional IO linked by intermediate

demand and final demand flows (trade link).

CARBON CONTENT AND CARBON FLOW

IN EU AND ROW

From production to final demand

EU Production EU Final Demand ROW Production ROW Final Demand

S S N N

TWO-REGIONAL EXTENDED IO TABLE

Two-regional IO table is modified to link factor income and consumption of the economy in order to account for induced effects.

Ind1 EU Ind2 EU Ind1 ROW Ind2 ROW Consump

• tions EU

Consump

• tions

ROW Invest- ment EU Invest- ment ROW TOTAL Production Account (EU) Ind1 CEE1 CER1 NEE1 NER1 Y1 Ind2 CEE2 CER2 NEE2 NER2 Y2 Production Account (ROW) Ind1 CRE2 CRR1 NRE1 NRR1 Y3 Ind2 CRE2 CRR2 NRE2 NRR2 Y4 Income (EU) VE1 VE2 Y5 Income (ROW) VR1 VR2 Y6 Net Savings EU SE Y7 Net Savings ROW SR SRE Y8 TOTAL Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8

SCENARIOS

Scenario 1: Production- based carbon flow based

• n IO transaction matrix (direct flow)

Scenario 2: Consumption-based carbon flow based

• n direct, indirect inter-industry demand by

activities for EU and ROW Scenario 3: Consumption-based carbon flow based

• n induced consumption for EU and ROW

SCENARIO 1: PRODUCTION- BASED CARBON

FLOW BASED ON IO TRANSACTION MATRIX



SCENARIO 2: CONSUMPTION-BASED

CARBON FLOW Based on direct, indirect inter-industry demand by activities for EU and ROW (Proops et al, 1993; Papathanasopoulou, 2005). Fossil carbon directly or indirectly embodied in

• ne unit of final production:

We arrange with respect to exogenous demand and Leontief inverse matrix.

SCENARIO 2 (CONTD.)



SCENARIO 2 (CONTD.)

For EU: For ROW:

• 1. Fossil carbon flow with production of

goods in EU to meet demand in EU:

SCENARIO 2 (CONTD.)

• 2. Fossil carbon associated with production of exports

goods in EU to meet final demand for imported goods from ROW:

• 3. Fossil carbon flow associated with industries in ROW

that are imported to meet intermediate demand in EU destined for final demand:

• 4. Fossil carbon flow associated with industries in ROW

to produce final goods that are imported by EU to meet imported final demand.

SCENARIO 2 (CONTD.)

Similarly we can define the components for ROW. Production and consumption based carbon flows for one region will be equal if we adjust and rearrange the components in the consumption- based accounting. Carbon flow for EU and ROW on the basis of production:

SCENARIO 3: CARBON FLOW BASED

WITH INDUCED CONSUMPTION

we conduct the same exercise as in scenario 2 But we internalize the economy’s consumption vector for both EU and ROW in the IO matrix by closing the leakages of value added income. Investment demands along with change in stocks become the final demand vectors. A matrix has now additional column and row vectors

SCENARIO 3 (CONTD.)

Multiplier equation is written as: Split the final demand vector into 2 columns

SCENARIO 3 (CONTD.)

Ignoring the last two rows and pre- multiplying the equation with the diagonal matrix of fossil carbon contents for EU and ROW:

OBSERVATIONS: SCENARIO 1

 EU is responsible for 1047.3 million tonnes

while ROW is for 9481.4 million tonnes, over 6 times more than EU’s carbon flow

 Carbon flow due to direct EU consumption

from ROW (both intermediate as well as final consumption) is 679.7 million tonnes, while for ROW from EU, it is only 93 million tonnes (7 times)

 The production based carbon flow is mainly

from the industry demand for the production activities (73% for EU and 78% for ROW)

OBSERVATIONS: SCENARIO 1 (CONTD.)

93% of carbon associated with domestic

production in EU is due to its domestic consumption purpose and almost the same percentage in case of ROW.

Highest

contributor fossil carbon products: EU: ‘coal, lignite, peats’; `gas oil’; ‘motor spirit’ ROW: ‘crude petroleum’; ‘coal, lignite, peats’

OBSERVATIONS: SCENARIO 2

Carbon flow associated with overall EU

consumption is 2049.5 million tonnes and for ROW is 8801.6 million tonnes (almost 4 times higher)

Difference

in consumption-based and production-based carbon flow is on account of inclusion of embodied trade flows.

Carbon flows associated with direct and

indirect EU consumptions produced in ROW is 906.7 million tonnes and ROW consumption produced in EU is 247.8 million tonnes (around 4 times)

OBSERVATIONS: SCENARIO 2 (CONTD.)

 82% of the carbon flow from goods produced in

EU to meet domestic consumption in EU and 90% for ROW.

 Carbon flow associated with the production to

support domestic consumption for ROW is almost 96% of its total accounted consumption-based carbon flow and only around 4% is due to import demand from EU; 56% and 46% respectively for ROW.

 Carbon products responsibility:

ROW to EU: mainly ‘crude oil’ (499 mil.tonnes) EU to ROW: ‘gas oil’, ‘coal; lignite, peats’; ‘crude

• il’

OBSERVATIONS: SCENARIO 3

Noticeable decline in carbon flow from

goods produced in EU to meet final demand in EU (58%) compared to earlier scenarios; 86% for ROW

 Carbon flows associated with production

in ROW to support consumptions in EU is 1218 million tonnes and it is 570 million tonnes for ROW (higher than earlier scenarios)

Both the regions share the responsibility

• f fossil carbon flow if analysis based on

induced consumption.

OVERVIEW

 Production based fossil carbon flow: EU carries

huge responsibility through imported products from ROW

 Consumption perspective analysis reduces the

responsibility

• f

domestic production in contributing to fossil

 carbon

flow while assigning increasing responsibility to consumption

 EU’s contribution of carbon flow in trade is the

maximum due to its import consumption of crude petroleum, followed by natural gas and ‘coal, lignite, peats’.

Scenario1 Scenario2 Scenario3 EU ROW EU ROW EU ROW

1

Coke oven products Electricity by coal Coal, lignite, peat Coal, lignite,peat Coal, lignite, peat Coal, lignite, peat

2

Electricity by coal Motor spirit (gasoline) Coke oven products Natural gas Coke oven products Natural gas

3

Motor spirit (gasoline) Fuel oils n.e.c. Motor spirit (gasoline) Motor spirit (gasoline) Motor spirit (gasoline) Motor spirit (gasoline)

4 Fuel oils n.e.c.

Coke oven products Gas oils Electricity by coal Gas oils Electricity by coal

5 Gas oils

Gas oils Electricity by coal Other petroleum Electricity by coal Other petroleum

6

Kerosene, jet fuel Electricity by gas Kerosene including kerosene type jet fuel Coke oven products Petroleum gases Coke oven products

7

Petroleum gases and otherS Petroleum gases Petroleum gases,other Fuel oils n.e.c. Kerosene, jet fuel Fuel oils n.e.c.

8 Other petroleum

Other petroleum Fuel oils n.e.c. Gas

• ils

Fuel oils n.e.c. Gas oils

9

Electricity by gas Manufactured gas Crude petroleum Petroleum gases Crude petroleum Petroleum gases

10

Manufactured gas Nuclear fuel Natural gas Crude petroleum Natural gas Crude petroleum

Table 5: Top ten activities with respect to carbon flows