Making sense of industry carbon footprints - the role of supply chains and inter-industry demand.
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Hypothetical extraction as a method of input-output economics is highly useful for analyzing the contribution to environmental footprints of specific industries, corporations, or intermediate products. Here, the method is derived in detail, based on a new paper published in the Journal of Industrial Ecology. https://onlinelibrary.wiley.com/doi/full/10.1111/jiec.13522 As an example, results for materials are presented from two additional papers published in Nature Geoscience and Environmental Science & Technology. https://www.nature.com/articles/s41561-021-00690-8 https://doi.org/10.1021/acs.est.2c05857
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Making sense of industry carbon footprints - the role of supply chains and inter-industry demand.
- 1. Using the hypothetical extraction method to understand the role of materials Edgar Hertwich
- 2. 2 Market balance and production balance Hypothetical extraction as removal of transactions Quantity and price model Carbon footprint of materials results Outline
- 3. 3 Supply and Use Tables System Definition Industries Commodity markets E V U 立 System boundary Flow vector Flow matrix 立 value added V industry supply E final demand U intermediate use Pauliuk et al., https://doi.org/10.1111/jiec.12306
- 4. 4 Input-output table System definition Industries Commodity markets Y x Z System boundary Flow vector Flow matrix factors, value added x total output Y final demand Z inter-industry flow Pauliuk et al., https://doi.org/10.1111/jiec.12306
- 5. 5 Input-output table System definition Pauliuk et al., https://doi.org/10.1111/jiec.12306 Industries Commodity markets ^ pY ^ p x ^ p A ^ x ^ T ^ x System boundary Flow vector Flow matrix factor use by industry x output by industry Y final demand for products Z inter-industry flow of products T factor use per unit industry output A product use per unit industry output factor price p product price
- 6. Industries Commodity markets Y x Z System boundary Flow vector Flow matrix factor use by industry x output by industry Y final demand for commodities Z inter-industry flow of commodities T factor use per unit industry output A commodity input per unit output factor price p product price Industries Commodity markets ^ pY ^ p x ^ p A ^ x ^ T ^ x (a) (b)
- 7. 7 Market balance yields Leontief demand-pull model Industries Commodity markets Y x Z System boundary value added x total output Y final demand Z inter-industry flow matrix Inputs to each commodity market = Outputs from the commodity market
- 8. 8 Inputs to each commodity market = Outputs from the commodity market Industries Commodity markets ^ pY ^ p x ^ p A ^ x ^ T ^ x System boundary Flow vector Flow matrix factor use by industry x commodity output by industry Y final demand for commodities Z inter-industry flow of commodities T factor use per unit industry output A commodity use per unit industry output factor price p commodity price Market balance yields Leontief demand model
- 9. 9 Industries Commodity markets ^ pY ^ p x ^ p A ^ x ^ T ^ x System boundary Flow vector Flow matrix factor use by industry x commodity output by industry Y final demand for commodities Z inter-industry flow of commodities T factor use per unit industry output A commodity use per unit industry output factor price p commodity price Production/firm/industry balance yields Leontief price model Cost of inputs to each industry = Value of outputs from the industry (I-A)
- 10. 10
- 11. 11 Production of materials in IO A y T Vector describes input per unit material produced. These are complete inputs. A Leontief demand pull calculation will hence give a complete picture of inputs per unit output. https://doi.org/10.1038/s41561-021-00690-8
- 12. 12 Use of materials in IO A y T Materials are used throughout the economy, including in the production of materials. So how much material is produced? Danger of double counting. What is the net demand for materials? https://doi.org/10.1038/s41561-021-00690-8
- 13. 13 Hypothetical extraction A* y* T Delete/extract the rows in question. What is production activity without the inputs of the deleted rows?? Impact of the extracted product: https://doi.org/10.1038/s41561-021-00690-8
- 14. 14 Hypothetical extraction as import is the volume of production necessary to produce the product(s) of interest (extracted products, target products). final demand for extracted products intermediate demand for extracted products to satisfy final demand for remaining products. A* Ao A y* yo To T*
- 15. 15 Production volume to produce imports External demand for extracted product Market balance for the extracted product A* Ao A y* yo To T*
- 17. 17 Production balance price vector for goods price vector for factor inputs T coefficient matrix of factor inputs transpose of price vector (row) equal factor costs A* Ao A y* yo To T*
- 18. 18 Production balance Production costs of extracted goods Product costs of remaining goods A* Ao A y* yo To T* Costs of extracted inputs Costs of inputs from the remaining economy
- 19. 19 =介 = ( ) Share of value added from extracted product
- 20. 20 y T A Cella (1984) - Linkages A y T T1 A11 y1 y2 A22 A12 A21 T2 Sectioning of the IO table
- 21. 21 , Market balance quantity model H
- 22. 22 Leontief inverse in two parts
- 23. 23 Cella Linkages via hypothetical extraction T1 A11 y1 y2 A22 T2 L =多
- 24. 24 Cella - Linkages T1 A11 y1 y2 A22 T2 Backward linkages Forward linkages Backward linkages Forward linkages ( H A12 L22 2 L22 A21 H A12 L22 2 )= ( L22 A21 H)12 22 2 = +
- 25. 27 Supply chain impact method T1 y2 A22 T2 L =多 Dente et al. (2018, 2019) and Cabernad et al. (2019)
- 26. 28 Production volume of a target sector y2 A22 T2 Cabernad et al. (2019)
- 27. Production volume of a target sector .. depends on how many sectors are targeted y2 A22 T2
- 28. 30 Global Resources Outlook 2024
- 29. 1. Increasing resources use is the main driver for the triple planetary crises. Extraction & processing of material resources accounts for: >90% of impacts on land-use related biodiversity loss and water stress >55% of GHG emissions up to 40% of particulate matter related pollution. Work by Cabernard et al. All sectors extracted at once.
- 30. 32
- 31. 33 Results
- 32. 34 Increasing share of iron and steel
- 33. 35 The first use of materials
- 34. 36 Final demand stimulating material use
- 35. 37 Final demand by region
- 36. 38 Hypothetical extraction and supply chain impact analysis is very useful It can isolate the effect of specific sectors Provides insight into scope 3 emissions; usefulness of footprinting for companies We have to be careful how we interpret the results Conclusions
- 38. 40 Including past emissions in todays capital stock
- 39. 41 Materials produced in Germany
- 40. 42 First use of materials in Germany
- 43. 45
- 44. Can efficiency outweigh affluency?
- 45. Can efficiency outweigh affluency?
- 46. Can efficiency outweigh affluency?
- 47. Can efficiency outweigh affluency?
- 48. Can efficiency outweigh affluency?
Editor's Notes
- #7: In the symmetric IO table , each industry is the exclusive supplier of a single commodity. The interpretation of the market balance is still the same: the total supply is equal to the sum of all demand, both intermediate and final.
- #8: In the symmetric IO table , each industry is the exclusive supplier of a single commodity. The interpretation of the market balance is still the same: the total supply is equal to the sum of all demand, both intermediate and final.
- #9: In the symmetric IO table , each industry is the exclusive supplier of a single commodity. The interpretation of the market balance is still the same: the total supply is equal to the sum of all demand, both intermediate and final.
- #31: Extraction and processing of material resources (fossil fuels, minerals, non-metallic minerals and biomass) accounts for over 90% of impacts on land-use related biodiversity loss and water stress, over 55% of greenhouse gas emissions and up to 40% of particulate matter related pollution. Growing and harvesting biomass (agricultural crops and forestry) contributes over 90% of total land-use related biodiversity loss and water stress. All these impacts show an increasing trend.
- #46: So, we are comparing 4 6-year periods from 1995 to 2018. And look at how the different drivers have impacted the emissions.
- #47: These are aggregated embodied emissions for those 6 year periods.
- #48: First period is dominated by increasing affluency. However, improved energy efficiency is a
- #49: Things look a bit dire in the middle period
- #50: Energy efficiency however does a strong comeback As well as metal consumption intensity