Incorporating jurisdiction issues into an analysis of carbon attributable to Welsh final consumption under different economic conditions: an integrated IO and CGE analysis

De Fence, Janine and Turner, Karen and Munday, Max (2010) Incorporating jurisdiction issues into an analysis of carbon attributable to Welsh final consumption under different economic conditions: an integrated IO and CGE analysis. In: 57th North American Regional Science Conference (NARSC). NARSC.

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Abstract

This paper considers the combined use of input-output (IO) and computable general equilibrium (CGE) methods to examine pollution problems from different consumption and production orientated perspectives. Application of IO analysis to attribute pollution generation to different production and consumption activities has become commonplace in the academic literature, though largely with a national/international rather than a regional focus. This reflects growing public and policy interest in accounting for pollution problems from a consumption-orientated perspective – e.g. carbon footprints, where concern lies with global pollution required to support regional consumption – while global agreements on emissions reduction tend to focus on pollution generation within the geo-political borders of individual nations (a production-orientated perspective). In this context, we consider the question of why policymakers have been slow to enact targets based on limiting emissions under consumption accounting measures. We argue that this may be due to the fact that policymakers in one jurisdiction do not have control over production technologies used in other jurisdictions. On this basis an approach is proposed that permits greater accountability of regional private and public (household and government) final consumption as the main driver of regional emissions generation, while retaining focus on the local production technology and consumption decisions that fall under the jurisdiction of regional policymakers. This involves using a regional input-output framework, where the combined use matrix is partitioned to identify use of domestic and imported commodities, augmented with data derived on carbon dioxide emissions by industry (and households) to examine regional accountability for emissions generation. We propose that this method permits an attribution of emissions generation that is likely to be of more use to regional policymakers than a full global footprint analysis. However, while as an accounting framework, IO tables and IO demand-driven multiplier techniques are absolutely appropriate for pollution attribution analyses (given that they provide all the required information on pollution embodied in intersectoral interactions and interregional trade flows), we go onto argue that where there is a need to examine the impact of changes in activity, IO is unlikely to be appropriate. This is because it is only a very special case of a wider set of general equilibrium approaches. Therefore, in this paper we combine the IO accounting framework with a regional CGE modelling framework (again taking the regional economy of Wales as a case example). We use the CGE framework to model the impacts of a change in activity, then use the model results to inform the IO analysis for the accounting/attribution analysis of pollution attributable to Welsh consumption activity before and after the change is introduced.