CO2 Multipliers in Multi-region Input-Output Models

Abstract

In order to achieve equitable reduction targets, international trade has to be taken into account when assessing nations' responsibility for abating climate change. Especially for open economies such as Denmark, greenhouse gases embodied in internationally traded commodities can have a considerable influence on the national 'greenhouse gas responsibility'. We set up a five-region input-output model including Denmark, Germany, Sweden and Norway in order to calculate CO2 multipliers and trade balances. We investigate multidirectional feedback between these countries, and hence the error inherent in a single-region input-output model. We also examine the effect of aggregation on the model results. In the case of Denmark, an 11 Mt CO2 trade surplus resulting from a single-region model turns into balance when multidirectional trade is considered. Moreover, aggregated models are likely to result in significant errors. Therefore, both the type and the degree of aggregation used for modelling CO2 responsibilities could have a major bearing in international negotiations.