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Research into policy applications of environmentally extended input-output models

Issue 14-04-2015In the period 2007-2010, as commissioned by OVAM, VMM-MIRA and LNE, VITO and the Federal Planning Bureau developed the Flemish environmentally extended input-output model (EE-IO model). This model systematically links economic data to environmental and employment data, for the entire world economy.

As such, it allows the charting and detailed analysis of the impact of production and consumption activities and patterns on the environment, economy and employment, throughout the entire value chain. The model has already been used for various (policy) studies, but its potential was not yet sufficiently known. That is why MIRA commissioned VITO to further examine the potential of the Flemish EE-IO model for supporting environment-related policy.

The power of EE-IO models is that they provide insight into both the direct and indirect impact of production and consumption on the environment and economy and possibly also on employment. In 2012, MIRA asked VITO to use the Flemish EE-IO model to chart the environmental impact of Flemish production and consumption. Answers were provided to questions such as: ‘Which economic sectors and which consumption activities in Flanders cause the greatest environmental pressures?’, ‘Where do these environmental pressures originate: within or outside of Flanders?' and 'Where in the chain do the greatest environmental pressures originate?’. It was found, for example, that roughly 70 % of the greenhouse gases linked to food consumed by Flemish households are emitted outside of Flanders, that one-third of the greenhouse gas emissions due to heating are released in the production chain of electricity and gas used, and that the Flemish greenhouse gas emissions linked to exported products are almost 30 % less than the greenhouse gas emissions included in the rucksack of the imported products that are consumed in Flanders. Such analyses reveal the 'hotspots' in the various production and consumption chains and can therefore be used as policy guidance.

The use of EE-IO models in research and policy has increased significantly in recent years, which is why MIRA commissioned VITO to further explore the potential of the Flemish EE-IO model for policy support purposes. In an initial phase, a comprehensive screening of the international literature on EE-IO applications was carried out. This resulted in an inventory of eighty or so analyses of interest to environment-related policy.

A first type of applications are the so-called problem analyses that identify, among other things, 'hotspots' in production and consumption and chart the dependence on other regions. For example:

  • What is the relationship between social household characteristics and various forms of energy consumption and air pollution caused by household consumption in Belgium?
  • What is the impact of consumption patterns in the EU on worldwide deforestation?

Other applications estimate the effects of possible future developments or policy measures, for example:

  • What is the direct water consumption and the water consumption in the supply chain of the various economic sectors in Andalusia? To what extent can water become a limiting factor in the growth of certain sectors in the region?
  • What are the energy and environmental advantages of the Italian policy of increasing the energy performance of buildings?
  • What is the economic impact of increasing energy efficiency and the use of renewable energy sources in Germany?

Not every question can be answered with every EE-IO model: the possible applications depend on the model specifications such as the level of detail and the availability of a time series. For some applications the model may have to be linked with other models.

In a second phase, the results of this literature study were presented as a kind of 'inspiration list' to a number of Flemish administrations. From these interviews a series of specific policy issues emerged. Some examples:

  • Which sectors or product groups are responsible for the pull effect of materials in Flanders, and from which regions do these materials come from?
  • What is the environmental impact of a shift to other dietary patterns?
  • To what extent does the Flemish food industry depends on imports?
  • What would be the direct and indirect (i.e. Other sectors and outside of Flanders) environmental, economic and socio-economic impact if the output of a given sector in Flanders were to be halved?

A screening shows that the Flemish EE-IO model, if necessary with additional data, greater detail or linked to other models, could answer many of these questions and therefore offers possibilities for supporting environment-related policy.

Structure of the Flemish environmentally extended input-output model

 Structure of the Flemish environmentally extended input-output model

Read the English summary of the Dutch report 'Research into policy applications of environmentally extended input-output models'

Study commissioned by MIRA, the Environment Reporting Unit
Research report MIRA/2015/06 en VITO/2015/SMAT/R/0029

researchers: An Vercalsteren, Ann Van der Linden, Theo Geerken, Maarten Christis, VITO

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