Final EXIOPOL conference: "Externality data and IO Tools for Policy analysis"

October 12th 2011 - Luxembourg


Background  Agenda  Location  Secretariat  Training session 


EXIOPOL followed two approaches to support cost-effectiveness and cost-benefit analysis of technologies, policies, and standard setting, at the micro, macro and meso level.

BOTTOM-UP approach
The project was a key contributor to expanding and synthesizing a database on environmental costs within the EU (and to some extent outside) measured in monetary terms. EXIOPOL evaluated, analyzed and assessed damages from emission of pollutants to air and water on various end points. The project therefore updated and detailed external costs by type of emissions, industry sector and country, and for a range of themes, namely: health, agriculture, biodiversity, forestry and wastes.
Such estimates are extremely useful in the setting of policies to control emissions at the local level, be it through technology standards or through fiscal incentives. The estimates and data are also of value in deriving coefficients for the environmentally extended input output systems (EEIO), which can then link the flows of these environmental burdens (in monetary terms) to the flows of goods and services that emerge from different economic policies. This is a complex task as the EEIO approach requires average damage estimates that apply at the national level. Hence the bottom up data have to be used to derive such average damage estimate appropriate for the EEIO exercise.

TOP-DOWN approach
EXIOPOL built the first detailed global Input-Output database covering all countries in the world - 43 countries in detail covering 95% of the global economy, and a “rest of the world” combining 160 countries. For each country, 130 sectors and products were discerned, while for each industry sector, 30 emissions and 80 types of primary resource extractions have been inventoried, alongside the use of 60 energy carriers by industry, using the IEA database. For the first time, it is possible to make global estimates of external costs of global production, to analyse how final consumption in a country causes impacts along global value chains and how the impacts vary across countries.
The tool developed shows the pivotal role of these instruments for measuring Sustainable Development, correcting GDP for environmental damage thanks to external costs. For instance, it is now possible for the first time to make an initial estimate of external costs of global air emissions and compare this with global GDP.
Eurostat used the tool developed within EXIOPOL to create true consumption based CO2 and Carbon footprint accounts - therefore correcting for apparent emission reductions in Europe, only caused by relocating polluting industries abroad. The Multi-regional Environmentally Extended Input Output (MR EE IO) Tables can be used to calculate a true consumption based Total Material Requirement (TMR) - thereby correcting a major drawback of indicators like the Domestic Material Consumption (DMC), that only includes the weight of imported products without their ‘Rucksack’ of primary materials used in their production. Overall, a combined system of MR EE IO with external costs forms probably the most comprehensive and integrated way to set up environmental and economic accounts, that can make very powerful contributions to a sound set of Sustainable Development Indicators by a.o. correcting GDP for environmental damage and by making trade-offs between countries, over time, etc., clearly visible.