Consumption Land Use Matrix (CLUM), Multi-regional Input-Output model (MRIO) and the link to trade

Consumption Land Use Matrix (CLUM), Multi-regional Input-Output model (MRIO) and the link to trade Nicole Grunewald March 26, 2014

Table of Contents 1. What is a CLUM? 2. What is IO? 3. What is MRIO? 4. Use of MRIO 5. How to reconcile NFA and MRIO? 6. Limitations

Table of Contents 1. What is a CLUM? And why is a CLUM useful? 2. What is IO? 3. What is MRIO? 4. Use of MRIO 5. How to reconcile NFA and MRIO? 6. Limitations

CONSUMPTION Breakdown of overall Footprint into its components LAND USE 3 Food 2 11% 0.5 100% 1.1 95% 0.7 2% 0.0 10% - 100% 0.3 2.7 Housing 25% 1.1-0.0 - - 35% 0.3 35% 0.1 -- 1.4 Mobility 16% 0.7-0.0 - - - - 35% 0.1 -- 0.8 Goods 32% 1.4-0.0 5% 0.0 50% 0.4 10% 0.0-1.9 Services 16% 0.7-0.0 - - 13% 0.1 10% 0.0 -- 0.9 NFA 1 4.4 1.1 0.8 0.8 0.3 0.3 7.7 National Consumption Footprint All numbers in (gha/cap)

gha per capita ECOLOGICAL FOOTPRINT BY HOUSEHOLD CONSUMPTIONS 1,0 0,9 0,8 0,7 Built-up Land Forest Land Fishing Grounds 0,6 0,5 0,4 0,3 0,2 0,1 - Grazing Land Cropland Carbon

What is Input-Output? Question: How to estimate the direct and indirect natural resource input of each consumption item. Sample production tree showing upstream inputs required to provide a hamburger to final consumer.

What is Input-Output? Input-output models are made up of matrices describing transactions between actors within an economy. Columns represent the industries such as agriculture Ag and manufacturing Ma, as well as final demand FD by governments and households. Rows represent product groups and their total input TI as well as value added VA. Transactions are generally accounted for in monetary values however some IO tables based on mass or energy transactions have been constructed.

Ecological Footprint adapted MRIO Multi-Regional Input-Output model to track the flow of traded commodities from country to country from origin to end use. This is based upon GTAP data that tracks the monetary flows of 57 sectors in 113 regions around the world. By using footprint intensities it is possible to track the flow of resources from country to country measured by the Ecological Footprint. And to produce Consumption Land Use Matrices (CLUM) for a variety of nations. This identifies the demands that populations are placing upon the biosphere in terms of differing consumption categories/sectors.

1.National Footprint Account (NFA) NFA,IO, and MRIO models 2.Single IO model 3. MRIO model Multiple countries

Overview of MRIO methodology

How is the data transformed? *The GTAP data base is coordinated by the Center for Global Trade Analysis in Purdue University's Department of Agricultural Economics. It provides a global data base describing bilateral trade patterns, production, consumption and intermediate use of commodities and services. (from GTAP web page) *EF = EF Intensity * Final Demand *Leontief Inverse = (I-A)-1 the Leontief inverse (input-output) table show the input requirements, both direct and indirect, on all other producers, generated by one unit of output (From OECD web page)

What are possible MRIO/CLUM products/applications? 1. Basic breakdown of national numbers rough, or detailed (typically along the line of food, housing, mobility, goods, services 2. Calculate Ecological Footprint of sub-national populations (household, socio-economic group, city, region) 3. Identify trade patterns and the source regions of ecological inputs (bottom of supply chain) 4. Identify regions consuming the nation s ecological inputs 5. Extract conversion efficiency 6. Compare structural difference between economies 7. Personal calculators (like www.footprintcalculator.org) 8. Policy analysis through economic modeling

Use of MRIO for analyzing trade patterns The results from the MRIO can be used to assess changes in trade patterns. As part of Global Footprint Network s Mediterranean Initiative maps have been developed to show the shift in trading partners with this region and the rest of the world. Highlighted here are the trends for imports, but exports can also be assessed.

Countries coloured green have a biocapacity remainder, those in red have a biocapacity deficit. The more intense the colour the larger the value. Map of imports to the Mediterranean for 1977

Note: shifting import patterns from countries in biocapacity deficit Map of imports to the Mediterranean for 2007

Use of MRIO results for policy analysis though CGE modeling Predominantly investments by firms, also includes purchases of residences by households, and infrastructure purchases by governments Gross Fixed Capital Formation Government Household Purchases of consumable items by households, under the categories: food Purchases by government of consumable items, categorized by the final producing sector

Footprint of Cities

Reconciliation between NFA and MRIO results (different trade results) 1. "Process-Based" method (piece-by-piece approach) Tracking of physical flows of materials and energy in various categories, multiplied by respective Footprint intensities (from LCA data bases) 2. Input-Output method (comprehensive approach) Using monetary flows between economic sectors to estimate all resource flows and ultimate origin of all those flows. For lack of better data, monetary flows are used to describe flows (as presented in national input-output tables). 2

EF p +EF i EF e = EF c same different different

Table of Contents 1. What is a CLUM? 2. What is IO? 3. What is MRIO? 4. How to reconcile NFA and MRIO? 5. Limitations 6. Possible Applications 7. Questions?

What are some limitations? (1/2) 1.Uncertainties in source data / Data gaps There are substantial data gaps and intermittent publication of inputoutput tables. the different base year of the tables for various nations. (ex. Honk Kong s data) Monetary flow (e.g., in current MRIO model) vs. physical flow (NFA) Monetary exchange rates, fluctuations within a year. 2.Resolution of sectors Aggregation and concordance to a common sectoral scheme Aggregation is a problem in particular when high and low impacting sectors are combined in one aggregated sector.( electricity together with gas and water production)

What are some limitations? (2/2) 3.Trade flow Trade statistics themselves bear a range of uncertainties which are (according to Lenzen et al., 2004, p.405) due to time lags between shipping of exports and receipt of imports differences in commodity classification reporting errors losses due to accidents in transits discrepancies of origin and destination country due to commodity re-export. 4.Concordance between industrial sectors and consumption categories The output from some industrial sectors corresponds to multiple consumption categories. In creating a concordance between industrial sectors and consumption categories, assumptions must be made regarding the distribution based on available data.

Thank you for your attention 11111

What is a CLUM?

Basic Structure of Input-output table Z + F =X (Intermediate output: Z + final demand: F) = (intermediate input + value add) = total output: X (or input). 2

Basic Structure of Input-output table Furthermore, final demand section is disaggregated into domestic final demand (consisting of household consumption, government consumption, and gross fixed capital formation) and trade related demand. The value added part is mainly divided into tax, compensation of employees and operating surplus. (Intermediate output: Z + final demand: F) = (intermediate input + value add) = total output: X (or input). 2

Basic Structure of Input-output table Z + F =X AX + F = X A = Zj / Xj 2

Basic Structure of Input-output table Z + F =X AX + F = X (I A) X = F X = (I- A) -1 F X = (I- A) -1 F Recipes of Economics Final Demand Leontief Inverse Matrix = (I A) -1 where I is the identity Matrix and A is the technical Coefficient Matrix 2

Applications of Input Output Analysis With the concept of Leontief Inverse as main engine, IO tables can provide consistent and reproductive tools for economic analysis including of industrial structure, growth, and employment. X = (I- A) -1 F Recipes of Economics Final Demand 2

Applications of Input Output Analysis Increasingly, input-output tables are applied to the environmental aspect, in what is called environmental extended input-output analysis (EEIO). EEIO can be used, for example, to measure direct and indirect CO2 emission by industry sectors in a given country. α X = α (I- A) -1 F where α is a physical co-efficiency vector which represents direct environmental pollutants such as carbon dioxide, methane, nitrous oxide, per unit currency. 2

Calculate Ecological Footprints of final demand categories, industry sector, and CLUM Ecological Footprint by final demands = EF tot (diag) * FD domestic where EF tot (diag) is the diagonal matrix of Total Footprint Intensity, FDdomestic is the domestic final demand expressed separately as household consumption, government consumption, and gross fix capital. 2

Calculate Ecological Footprints of final demand categories, industry sector, and CLUM The Ecological Footprint was redistributed to a domestic final demand category by multiplying EF tot by domestic final demand, FD domestic. Domestic final demand mainly consists of three components such as household consumption, government consumption, gross fixed capital (GFC). Ecological Footprint by final demand category can clearly show the responsibility of each player to entire National Footprint. 2

1. Sector based Footprints were redistributed in IO/COICPI concordance table, and then Footprints by COICOP category were obtain by summing the number in each column in the concordance table. 2. Finally, Footprints by COICOP in each land type were set in CLUM table accordingly. 2

Flowchart of calculation methodology Step 1: Initial Allocation Step 2: Input-output based Ecological Footprint analysis Step 3: Consumption Land Use Matrix (CLUM) Footprint by industry sector

Step 1: Initial Allocation 1. Ecological Footprint (EF) A. Land Based EF Cropland, Grazing land, Forest land, Fishing ground, and Built-up land 3. Input-output Table Initial Allocation Data source National Footprint Account (NFA) B. Carbon EF 2. Data for CO 2 emission Carbon EF in Industry Carbon Footprint in Direct Household Consumption

Step 2: Input-output based Ecological Footprint analysis 3. Input-output Table Total Output for Domestic final demand ($) Leontie f Inverse (I-A)-1 Resource requirement by sector Final Demand Household consumption Government consumption Gross Fixed Capital Results Initial Allocation Physical Intensity for EF consumption (EFdirect) Total Footprint Intensity (TFI) Translates production input to consumer output Total Required Footprint (TRF) EF by Final Demand (gha) EF by Industry Sector (gha)

Step 3: Consumption Land Use Matrix (CLUM) National CLUM EF by Industry Sector (gha) 4.Concordance table Carbon EF in Direct Household Consumption

Work hard!

What is the outcome?

Translation of Ecological Footprint Economics activity + consumption based EF