Price Corrected Domestic Technology Assumption—A Method To Assess Pollution Embodied in Trade Using Primary Official Statistics Only. With a Case on CO2Emissions Embodied in Imports to Europe

Abstract

Environmentally extended input output (EE IO) analysis is increasingly used to assess the carbon footprint of final consumption. Official EE IO data are, however, at best available for single countries or regions such as the EU27. This causes problems in assessing pollution embodied in imported products. The popular "domestic technology assumption (DTA)" leads to errors. Improved approaches based on Life Cycle Inventory data, Multiregional EE IO tables, etc. rely on unofficial research data and modeling, making them difficult to implement by statistical offices. The DTA can lead to errors for three main reasons: exporting countries can have higher impact intensities; may use more intermediate inputs for the same output; or may sell the imported products for lower/other prices than those produced domestically. The last factor is relevant for sustainable consumption policies of importing countries, whereas the first factors are mainly a matter of making production in exporting countries more eco-efficient. We elaborated a simple correction for price differences in imports and domestic production using monetary and physical data from official import and export statistics. A case study for the EU27 shows that this "price-adjusted DTA" gives a partial but meaningful adjustment of pollution embodied in trade compared to multiregional EE IO studies.