PHYS5033
Environmental Footprints and IO Analysis
Reading Material
Week 7
Week 7 Multi-region input-output tables
So far we have considered input-output tables related to one location or region, for example the Australian input-output tables curated by the ABS (Australian Bureau of Statistics, 2022). These are known as single-region input-output (SRIO) tables and contain detailed information on the flow of money between sectors in one region only, with one vector capturing imports into the region, and one vector capturing exports out of the region. Multi-region input-output (MRIO) tables are used when information on the flow of money between sectors across more than one location, or region, is known. These regions may be sub-national, such as states or local government areas within a country, or international, with each country representing one region (Lenzen et al., 2013; Lenzen et al., 2014; Malik et al., 2019).
The structure of a MRIO is similar to a SRIO, with a T, v and Y matrix, one row vector for imports into each region from the regions not included in the MRIO, and one column vector for exports out of each region to the regions not included in the MRIO. Figure 7.1 provides a visual overview of the components of a MRIO, with colour-coding to illustrate the ‘domestic’ transactions within each matrix – those that take place within each region. All other transactions are taking place between regions, for example the transactions contained in the area represented by ‘TNZL-AUS’ are the inputs required by sectors based in Australia from the sectors based in New Zealand, and the transactions contained in the area represented by ‘YFJI-AUS’ are the final demand for Fijian goods and services coming from Australian households and government.
Figure 7.1: A simplified overview of a multi-region input-output (MRIO) table. Domestic transactions have been highlighted in green for the T matrix, blue for the Y matrix, and purple for the v matrix. Note that there is only one column vector for exports, and one row vector for imports (highlighted by the red circles), since the imports and exports between the regions in the MRIO are already captured.
Once satellite accounts are added to a MRIO table, footprints can be calculated on a multi-regional scale, providing insights into the location and sectors of consumption that create the environmental, social, and/or economic impact being analysed. As an example, consider the supply chain which supports a cutlery set sold in New Zealand, which was manufactured in Vietnam using steel produced in China with iron ore which was mined in Australia. This supply chain encompasses transactions across four countries (New Zealand, Vietnam, China, and Australia) and across three sectors (manufacturing, metallurgy, and mining) and is illustrated in Figure 7.2.
Figure 7.2: Illustrative supply chain which includes the purchase of a cutlery set by a household consumer in New Zealand, which was manufactured in Vietnam using steel sourced from China, which was produced with iron ore mined in Australia.
A MRIO with a satellite matrix including GHG emissions and energy use can be used to calculate the respective footprints of the consumption of this cutlery set, as illustrated in Figure 7.3. As noted in week 3, while the consumer will purchase the cutlery set from the retail sector, most of the value of this expenditure will be accounted for against the sector of production, in this case the manufacturing sector.
Figure 7.3: Simplified visual of a MRIO which can be used to calculate the footprints associated with the purchase of a cutlery set by a consumer in New Zealand, manufactured in Vietnam using steel sourced from China which was produced with iron ore mined in Australia.
References
Australian Bureau of Statistics 2022, Australian National Accounts: Input-Output Tables, 2019-20 financial year, viewed July 3, 2022, https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-input-output-tables/latest-release
Lenzen, M, Geschke, A, Wiedmann, T, Lane, J, Anderson, N, Baynes, T, Boland, J, Daniels, P, Dey, C, Fry, J, Hadjikakou, M, Kenway, S, Malik, A, Moran, D, Murray, J, Nettleton, S, Poruschi, L, Reynolds, C, Rowley, H, Ugon, J, Webb, D & West, J 2014, 'Compiling and using input-output frameworks through collaborative virtual laboratories', The Science of the Total Environment, vol. 485-486, no. 1, pp. 241-251.
Lenzen, M, Moran, D, Kanemoto, K & Geschke, A 2013, 'Building Eora: A global multi-region input-output database at high country and sector resolution', Economic Systems Research: Global Multiregional Input-Output Frameworks, vol. 25, no. 1, pp. 20-49.
Malik, A, Mcbain, D, Wiedmann, TO, Lenzen, M & Murray, J 2019, 'Advancements in Input‐Output Models and Indicators for Consumption‐Based Accounting', Journal of Industrial Ecology, vol. 23, no. 2, pp. 300-312.
Other reading
Wiedmann, T 2009, ‘A review of recent multi-region input–output models used for consumption-based emission and resource accounting’, Ecological Economics, 69 (2), 211–222. doi:10.1016/j.ecolecon.2009.08.026.
Wiedmann, T, Wilting, HC, Lenzen, M, Lutter, S & Palm, V 2011, 'Quo Vadis MRIO? Methodological, data and institutional requirements for multi-region input–output analysis', Ecological economics, vol. 70, no. 11, pp. 1937-1945.