Consumption-based Accounting Research Articles

Review on City-Level Carbon Accounting.

Carbon accounting results for the same city can differ due to differences in protocols, methods, and data sources. A critical review of these differences and the connection among them can help to bridge our knowledge between university-based researchers and protocol practitioners in accounting and taking further mitigation actions. The purpose of this study is to provide a review of published research and protocols related to city carbon accounting, paying attention to both their science and practical actions. To begin with, the most cited articles in this field are identified and analyzed by employing a citation network analysis to illustrate the development of city-level carbon accounting from three perspectives. We also reveal the relationship between research methods and accounting protocols. Furthermore, a timeline of relevant organizations, protocols, and projects is provided to demonstrate the applications of city carbon accounting in practice. The citation networks indicate that the field is dominated by pure-geographic production-based and community infrastructure-based accounting; however, emerging models that combine economic system analysis from a consumption-based perspective are leading to new trends in the field. The emissions accounted for by various research methods consist essentially of the scope 1-3, as defined in accounting protocols. The latest accounting protocols include consumption-based accounting, but most cities still limit their accounting and reporting from pure-geographic production-based and community infrastructure-based perspectives. In conclusion, we argue that protocol practitioners require support in conducting carbon accounting, so as to explore the potential in mitigation and adaptation from a number of perspectives. This should also be a priority for future studies.

How production-based and consumption-based emissions accounting systems change climate policy analysis: the case of CO2 convergence.

Much of the existing research analyses on emissions and climate policy are dominantly based on emissions data provided by production-based accounting (PBA) system. However, PBA provides an incomplete picture of driving forces behind these emission changes and impact of global trade on emissions, simply by neglecting the environmental impacts of consumption. To remedy this problem, several studies propose to consider national emissions calculated by consumption-based accounting (CBA) systems in greenhouse gas (GHG) assessments for progress and comparisons among the countries. In this article, we question the relevance of PBA's dominance. To this end, we, firstly, try to assess and compare PBA with CBA adopted in greenhouse gas emissions accounting systems in climate change debates on several issues and to discuss the policy implications of the choice of approach. Secondly, we investigate the convergence patterns in production-based and consumption-based emissions in 35 AnnexB countries for the period between 1990 and 2015. This study, for the first time, puts all these arguments together and discusses possible outcomes of convergence analysis by employing both the production- and consumption-based CO2 per capita emissions data. The empirical results found some important conclusions which challenge most of the existing CO2 convergence studies.

Energy intensity and embodied energy flow in Australia: An input-output analysis

Decoupling energy use from economic growth is critical for improving energy productivity and mitigating climate change. Input-output databases have been increasingly utilised for consumption-based energy accounting, and for exploring both the direct and indirect influence of energy use. This study performed an environmentally-extended input-output analysis of energy use in Australia from 2006 to 2015 to investigate the total energy intensity of industry sectors, and the embodied energy flow from sources of energy use to the final consumption of commodities. Between 2006 and 2015, the national direct energy intensity reduced by an average of 2% per annum. Nearly all industry sectoral groups reduced their total energy intensity because of direct energy intensity reduction from other or within industry sectoral groups. The difference between the embodied energy use in the import and the export had widened, making Australia a greater net importer of embodied energy with significant outsourcing of direct energy use and associated greenhouse gas emissions. Despite a slight reduction in per capita direct household energy use (3%), the per capita indirect energy use embodied in household commodity consumption increased by 7%. As indirect household energy use is more than three times direct household energy use, improving end use energy efficiency should also consider the embodied energy in commodities. Structural decomposition analysis shows that for the studied period, population growth and per capita demand for imported commodities are two major contributors for the increased total embodied energy in Australia.

Key transmission sectors of energy-water-carbon nexus pressures in Shanghai, China

Previous studies examining the energy-water-carbon nexus mainly use consumption-based accounting and focus on one individual sector. This study employed a betweenness-based method and principal components analysis (PCA) to target the energy-water-carbon pressure transmission center sectors in Shanghai, China IEA, 2012. The betweenness-based method is to analyze the transmission effect of each urban sector regarding one single environmental pressure, and PCA is applied to discuss the energy-water-carbon nexus pressure transmitted by each urban sector. The consumption-based results are also calculated for comparison. The findings show that critical energy-water-carbon nexus transmission sectors included sector 20 (manufacture of communication equipment, computer, and other electronic equipment), sector 12 (manufacture of chemicals and chemical products), sector 14 (manufacture of processing metals), sector 35 (renting and leasing, business services), and sector 30 (transport, storage, and post). The consumption-based results showed that sector 20 and sector 12 generate remarkable energy-water-carbon nexus pressures. The results highlight the sectors that exert a significant amount of environmental pressures and suggest that policymakers should pay attention to the role that transmission sectors play in urban resource conservation and emission reduction. These betweenness-based and consumption-based results can be combined to provide a benchmark for evaluating the mitigation of energy-water-carbon pressures in cities.

Energy, Water and Food Requirements of China’sRegional Development

Owing to uneven development and unbalanced resource endowments within China, ensuring reliable energy, water and food supply is the core challenge to regional sustainable development. This study uses the latest multi-regional input-output model to quantify energy, water and food resource requirements of Mainland China’s 31 provincial regions in 2012. Results show that the resource occupancy levels of the eastern developed area were much higher than the northeast, central and western areas, which contributed 45.1%, 42.1% and 39.6% of total domestic energy, water and agri-food resource requirements, respectively. The total interprovincial trade transfers of embodied energy, water and agri-food resources were equivalent to 73.4%, 33.9% and 37.4% of the total domestic direct inputs, respectively. Substantial transfers of embodied energy, water and agri-food resources were identified from the central and western regions to the eastern regions. Investment was the leading final demand category for energy resources while consumption was the largest final demand category for water and agri-food. Consumption-based accounting of energy, water and agri-food requirements provides important implications for understanding the imbalance of regional development faced by the Chinese society to achieving sustainable development.

Revising Emission Responsibilities through Consumption-Based Accounting: A European and Post-Brexit Perspective

International trade shifts production of a large amount of carbon dioxide (CO2) emissions embodied in traded goods from the importing country to the exporting country. The European Union (EU) plays a prominent role in the flow of international-related emissions as it accounts for the second largest share of global exports and imports of goods. Consumption-based accountings (CBA) emerged as alternative to the traditional emission inventories based on the Intergovernmental Panel on Climate Change (IPCC) guidelines. According to the IPCC criteria, countries where products are consumed take no responsibility for the emissions produced by exporter countries, thus neglecting the emissions embodied in trade. By taking this aspect into account, CBA are considered of great importance in revealing emissions attributed to the final consumer. Using a CBA approach, this paper evaluates the impact of international trade in the EU in terms of CO2 emissions, looking both at the internal trade flows within the EU-28 and at the external trade flows between the EU and the rest of the world during the period 2012–2015. We find that the EU is a net importer of emissions as its emissions due to consumption exceed those due to production. In particular, in 2015 the ratio between import- and export-embodied emissions was more than 3:1 for the EU-28 that imported 1317 Mt CO2 from the rest of the world (mainly from China and Russia) while exporting only 424 Mt CO2. Concerning emissions flows among EU countries, Germany represents the largest importer, followed by the UK. To get a deeper understanding on possible environmental implications of Brexit on UK emission responsibilities, the paper also advances a few hypotheses on how trade flows could change based on the existing trade patterns of the UK. Data analysis shows that a 10% shift of UK imports from EU partners to its main non-EU trading partners (India, China, and US) would increase its emission responsibility by 5%. The increase in UK emission responsibility would more than double (+11%) in case of a 30% shift of UK imports. Similar results would apply if UK replaced its current EU partners with its main Commonwealth trading partners as a result of Brexit.

Reply to the Comment by Zhang and Fang (2019) on Consumption-Based Versus Production-Based Accounting of CO2 Emissions

Zhang and Fang (2019) criticize our finding (Franzen and Mader 2018) that there is (on average) no carbon leakage from developed to developing countries. In the paper we show that countries’ GDP per capita is statistically not related to the ratio of consumption-based (CBA) to production-based (PBA) accounting of CO2 emissions. Hence, the ratio of the two accounting schemes does not differ between richer and poorer countries or, put differently, does not depend on a country’s GDP per capita. Zhang and Fang (2019) have two concerns with our paper: First, they believe that we should have used the Global Carbon Atlas (GCA) for both CBA and PBA and should not have mixed the data with the Emissions Database for Global Atmospheric Research (EDGAR); we used the EDGAR to obtain countries’ PBA and the GCA to obtain their CBA. Second, the authors argue that we should not have used the ratio of CBA to PBA but the difference of CBA – PBA for our analyses. In what follows, we respond to both concerns.

Indicators for national consumption-based accounting of chemicals

Increased chemical use is causing a growing number of environmental problems and chemical products are pervasive in societies within animal and crop-based agriculture, in industrial processes and in households. National environmental targets, as well as the global chemical-related goals in the 2030 Agenda, call for the monitoring of chemical use and emissions. The growing international trade of goods, where use and regulation of chemical inputs vary highly between countries, complicates measurements. This paper addresses these issues by deriving a set of indicators on chemical use and emissions and connect the global impacts to a country's total consumption, here using the case of Sweden. The indicators are based on a hybrid model combining the multi-regional input-output analysis database EXIOBASE with data from the Swedish System of Economic and Environmental Accounts together with a novel set of environmental extensions. A review of databases is conducted and discussed in relation to the driver-pressure-state-impact-response (DPSIR) framework for indicators. Five indicators are calculated, showing the chemical use and emissions connected to consumption, both within a country and abroad. The indicators are: use of hazardous chemical products, use of pesticides, use of antimicrobial veterinary medicines, emissions of hazardous substances, and of the potential toxicity of these emissions. The results show that the impact of Swedish consumption in terms of use and emissions of hazardous substances is largely taking place outside the Swedish borders. Only 10–24% of the pressure from Swedish consumption is shown to occur within Sweden's borders, depending on the indicator. The use of hazardous chemical products and veterinary medicines related to Swedish consumption primarily takes place in other EU countries, whereas the use of pesticides as well as reported emissions of pollutants occur mainly in countries outside the EU. The results highlight the need for improved international accounting of chemical flows, as well as for strengthened policy frameworks to address cross-border impacts of consumption of hazardous chemical products.

Consumption-based accounting of CO2 emissions in the sustainable development Goals Agenda

ABSTRACTIn 2017 the paper ‘The Sustainable Development Oxymoron: Quantifying and Modelling the Incompatibility of Sustainable Development Goals’ was published, showing that there is a conflict between socio-economic development goals and ecological sustainability goals using cross-country time-series data. The authors looked at production-based CO2 emissions to measure and model the 13th SDG goal addressing climate change. Their models showed that production-based CO2 emissions were stalling or even decreasing in rich countries, which suggests that other countries are also likely to see stalling and decrease in their CO2 emissions once they become rich. However, this conclusion can be challenged when accounting for consumption-based CO2 emissions rather than production-based CO2 emissions. In this follow-up paper, we re-run some of the analyses performed in the original paper making use of consumption-based CO2 emissions. The analysis confirms the inherent SDG conflict between socio-economic and ecological SDGs. But, this new analysis demonstrates that from a consumption perspective the trend of stalling or decreasing CO2 emissions is reversed, with natural depletion costs being exported to poorer countries. Despite this new perspective on CO2 emissions, the conflict between SDG goals can still be avoided by making investments in public health, education and renewable energy, as suggested in the original paper.

Improving consumption based accounting for global capture fisheries

Consumption-based accounting has been used to understand the resource and environmental pressures associated with the consumption of goods and services. Capture fisheries have significant economic, cultural, and environmental importance, yet relatively limited attention has been given to understanding their consumption-linked pressures. Where products of marine and inland fisheries are accounted for, they are typically done so within the context of ‘material’ footprints or within life cycle assessment-based studies which draw more attention to resource efficiency or pollution-related aspects of fisheries than the species or ecosystem-linked consequences of the extraction process itself. However, the sustainability of fisheries products is highly dependent on the catch method, location, and species targeted. To date, these have been missing from consumption-based accounts. Here, a collation of species-specific information comprising vulnerability and environmental pressure associated with capture is provided, which is then linked to a global multi-regional input-output model to - for the first time - create a dedicated consumption-based time-series for fisheries. Whilst the aggregate footprint of global capture fisheries has remained stable in recent decades, our results demonstrate that at national or regional scales different trends in consumption exist. Importantly, there have been significant shifts in the composition of catch within these consumption accounts, which have potential implications for the sustainability of underpinning supply chains. This paper draws attention to the fact that material efficiency perspectives are insufficient in the assessment of pressures on the marine environment driven by consumption of fisheries products, and – whilst challenges remain - there is a growing abundance of information and development of methods that could potentially be utilised to overcome gaps in the future.

Modeling the cost transmission mechanism of the emission trading scheme in China

The national emission trading scheme (ETS) in China, CHN-ETS, was established in 2017 following the start of its regional pilot markets in 2013. It will start with a coverage of electricity supply sector and eight pilot regions. Due to a highly regulated dispatch and pricing system in the electricity supply sector, the additional emission abatement costs brought by the ETS cannot be automatically conveyed between consumers and producers in all regions. This paper modeled the cost transmission of ETS in three scenarios based on the quantification results of regional and sectoral emission flows in the electricity supply sector under consumption-based accounting. The results show that the emissions transferred into pilot cities outweighed the emissions transferred out, not only through direct electricity uses but also through the indirect emissions embodied in other sectors that required intermediate inputs from electricity supply sectors in the pilot cities. Through the cost transmission mechanism, the additional abatement cost caused by the national ETS drove the increases in the household consumption of several energy-intensive sectors, including the metal mining sector in Hebei, the petroleum and gas sector in Heilongjiang, and the nonmetal mining sector in Sichuan, with a sensitive increase of 10.1%, 9.9%, and 3.5%, respectively. However, most sectors (745 of the 810) would suffer an increase rate below 0.1%. As long as the household welfare would be ensured, there is still room for the current average market price in the pilot cities to be further increased toward the official guidance price in the nation-wide market.

A Fundamental Factor Model

This paper constructs a fundamental pricing factor based on observed accounting information. In contrast to standard models where accounting data often enter via data dredging, the factor is founded on consumption-based asset pricing theory and accounting principles that connect accounting numbers to consumption at risk. The factor performs well relative to standard factors in explaining cross-sectional returns. Further, it delivers out-of-sample expected returns that forecast the actual returns that investors receive, a feature on which extant asset pricing models perform poorly. The factor return has little correlation with the market portfolio, and exhibits the property of protecting payoffs in bad states when consumption is low. This prompts a two-factor representation that combines the market portfolio and a zero-beta portfolio with a hedge against loss to consumption.

Consumption-Based Accounting and the Trade-Carbon Emissions Nexus in Asia: A Heterogeneous, Common Factor Panel Analysis

This paper considers a recently developed consumption-based carbon emissions database from which emissions calculations are made based on the domestic use of fossil fuels plus the embodied emissions from imports minus exports, to test directly for the importance of trade in national emissions. The People’s Republic of China (PRC) alone is responsible for over half the global outflows of carbon via trade. The econometric estimations—which focused on a panel of 20 Asian countries—determined that: (i) trade flows were significant for consumption-based emissions but not for territory-based emissions; and (ii) exports and imports offset each other in that exports lower consumption-based emissions, whereas imports increase them. Hence, all countries should have both an interest and a responsibility to help lower the carbon intensity of energy in countries that are particularly important for global carbon transfers—the PRC and India.

Driving factors of electric carbon productivity change based on regional and sectoral dimensions in China

In order to reduce carbon emissions and maintain economic development in the power industry of China, the improvement of electric carbon productivity (ECP) creates more efficiency. The carbon emission estimation in the power industry is significant to the ECP calculation in this study. Thus, to make the ECP calculation more reasonable and fair, this study estimates carbon emissions from the power industry by the consumption-based accounting principle considering power transfers among the provinces. In addition, this research analyzes seven driving factors of ECP change in China by exploring the time series decomposition (2003–2015) from the power consumption perspective. The Logarithmic Mean Divisia Index (LMDI) method takes the regional and departmental dimensions into consideration. By applying the data from 30 provinces (including province-level municipalities) and three industrial sectors between 2010 and 2015, the influencing factors of ECP in each province and each industrial sector are discussed. The results show that: 1) Regional and industrial sector ECP, per capita GDP are the driving factors of increasing ECP; conversely, environmental efficiency of power consumption, industrial structure effect from the perspective of power consumption, economic efficiency effect of power consumption, and the ratio of total population to electric CO2 emissions play leading roles in the decline of ECP. 2) From 2003 to 2015, there are four distinct stages of the ECP changes. 3) The sub-regional decomposition indicates, during 2010–2015, the main power exporters have higher or medium level ECP, and the main power importers with rapid economic development manifest lower or medium level ECP. 4) Instead of solely focusing on GDP, the Chinese government should pay more attention to increasing the economic and environmental efficiency of power utilization. 5) The sub-sector decomposition shows, during 2010–2015, although the economic and environmental efficiency of power utilization are negative in the secondary industry, they are the greatest among the three industrial sectors, and the influence of the economic scale effect is stronger than that of technological impact on different industrial sectors. Finally, several conclusions are obtained which might be useful for the central and local governments to improve the national and regional ECPs.

Endogenizing Capital in MRIO Models: The Implications for Consumption-Based Accounting.

Nearly 30% of global greenhouse gas emissions are associated with the production of capital goods. Consumption-based emission calculations based on multiregional input-output (MRIO) models allocate emissions occurring in the production of intermediate goods to the final goods produced in an economy. Like intermediate goods, capital goods are used in production processes; yet the emissions associated with their production are not allocated to the industries using them. As a result, the carbon footprint of final consumption as well as emissions embodied in trade are currently underestimated. Here, we address this problem by endogenizing capital transactions in the EXIOBASE global MRIO database, thereby allocating emissions from capital goods to final consumption. We find that endogenizing capital substantially increases the carbon footprint of final consumption (by up to 57% for some countries), and that the gap between production-based and consumption-based emissions increases for most countries. We also find that the global emissions embodied in trade increase by up to 11%, and that current patterns of bilaterally traded emissions are amplified. Furthermore, endogenizing capital leads to a 3-fold increase in the carbon footprint of certain product categories. The results suggest that our approach constitutes an important improvement to current input-output methodology.

Consumption-based greenhouse gas emissions accounting with capital stock change highlights dynamics of fast-developing countries

Traditional consumption-based greenhouse gas emissions accounting attributed the gap between consumption-based and production-based emissions to international trade. Yet few attempts have analyzed the temporal deviation between current emissions and future consumption, which can be explained through changes in capital stock. Here we develop a dynamic model to incorporate capital stock change in consumption-based accounting. The new model is applied using global data for 1995–2009. Our results show that global emissions embodied in consumption determined by the new model are smaller than those obtained from the traditional model. The emissions embodied in global capital stock increased steadily during the period. However, capital plays very different roles in shaping consumption-based emissions for economies with different development characteristics. As a result, the dynamic model yields similar consumption-based emissions estimation for many developed countries comparing with the traditional model, but it highlights the dynamics of fast-developing countries.

Consumption-Based Accounting of CO2 Emissions in the Sustainable Development Goals Agenda

In 2017 the paper Sustainable Development Oxymoron: Quantifying and Modelling the Incompatibility of Sustainable Development Goals (Spaiser et al. 2017) was published, showing that there is a conflict between socio-economic development goals and ecological sustainability goals using cross-country time-series data. The authors looked at production-based CO2 emissions to measure and model the 13th SDG goal addressing climate change. Their models showed that production-based CO2 emissions were stalling or even decreasing in rich countries, which suggests that other countries are also likely to see stalling and decrease in their CO2 emissions once they become rich. However, this conclusion can be challenged when accounting for consumption-based CO2 emissions rather than production-based CO2 emissions. In this follow-up paper, we re-run some of the analyses performed in the original paper making use of consumption-based CO2 emissions. The analysis confi rms the inherent SDG conflict between socio-economic and ecological SDGs. But, this new analysis demonstrates that from a consumption perspective the trend of stalling of decreasing CO2 emissions is reversed, with natural depletion costs being exported to poorer countries. Despite this new perspective on CO2 emissions, the conflict between SDG goals can still be avoided by making investments in public health, education and renewable energy, as suggested in the original paper.

Assessing Global CO2 Emission Inequality From Consumption Perspective: An Index Decomposition Analysis

CO2 emission inequality among countries is a key issue in international climate negotiations. In view of the growing popularity of the consumption-based emission accounting system in climate policy studies, analyzing the emission inequality from the consumption perspective can help policymakers design emission abatement scenarios that are fairer to all parties. Using a new approach based on the Theil index and the index decomposition analysis (IDA) technique, this paper examines global per capita consumption-based emission inequality in 1995–2009. The sources and determinants of both the status and evolution of the emission inequality are quantified. The empirical results show that the global emission inequality was sourced mainly from the emerging economies, particularly China and India. The global inequality decreased at an accelerating rate during the period studied. The narrowing disparity among countries in per capita consumption level drove, while the expanding disparity in consumption-based emission intensity largely hindered, the inequality reduction. Comparing the consumption-based emission inequality with that under the production-based principle reveals that the latter partly masked the inequality in the distribution of global CO2 emissions through production outsourcing. More detailed results and discussions are presented.

Consumption-based emissions accounting: the normative debate

ABSTRACTThe normative debate surrounding consumption-based emissions accounting, conceived of as a method for constructing national emissions inventories, is investigated. The focus is to examine whether such accounting would be more just than the current method of production-based accounting. It is argued that there is no good reason to think that consumption-based accounting would be less just, and some reason to think that it would be more just. The consequences of this for the overall question of whether to adopt consumption-based accounting are also investigated.

The roles of the metallurgy, nonmetal products and chemical industry sectors in air pollutant emissions in China

The metallurgy, nonmetal products and chemical industry sectors (MN&C) are the three major industrial sources of air pollutants in China. Previous studies have focused on calculating emissions from MN&C via production-based accounting and identifying the drivers of MN&C using consumption-based accounting. However, these previous studies did not discuss how the total outputs from MN&C upstream and downstream industries influence air pollutant emissions. In this study, we use a pure backward linkage (PBL) method to quantify emissions from industries upstream of MN&C and to evaluate how the downstream industries drive the outputs of MN&C in China. We find that the emissions from industries upstream of MN&C are generally higher than the production-based emissions of MN&C. In particular, the chemical industry largely increased its contribution to air pollution according to the PBL method. Furthermore, much of upstream emissions of MN&C are embodied in the interregional trade, transferring substantial emissions from the eastern region to inland provinces. Regarding the drivers of MN&C, our results reveal that consumption-based accounting underestimates the importance of many sectors. The outputs of these previously underestimated sectors could maximally cover 80% of metallurgy, 85% of nonmetal products and 25% of chemical industry outputs. We suggest that improving the structure of MN&C would considerably help decrease the environmental burden on the entire supply chain. Additionally, improving the productivities of MN&C downstream industries could also address the air pollution caused by MN&C.