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A supply-use approach to capital endogenization in input–output analysis

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  • Carl-Johan H. Södersten
  • Manfred Lenzen

Abstract

Input–output analysis currently treats capital investment as exogenous to the inter-industry system despite capital goods being used further in production processes. Previous studies have applied the Leontief calculus to include impacts of capital in footprint calculations. Here, we adopt a supply-use approach to incorporating capital into footprint calculations, by constructing capital supply-use tables (KSUTs) that enable differentiating capital goods. As the new KSUT formalism is compliant with the Supply-Use formalism in the UN's System of National Accounts, we can keep full transparency throughout the process of calculating impact multipliers. We demonstrate the usefulness of the KSUT framework in a case study of the Australian economy, with environmental extensions from the EXIOBASE3 database. If consumption-based emissions were considered for the UN's Framework Convention on Climate Change, the KSUT framework would provide a consistent and transparent foundation for working out countries’ responsibility for carbon emissions from both current use and capital investment.

Suggested Citation

  • Carl-Johan H. Södersten & Manfred Lenzen, 2020. "A supply-use approach to capital endogenization in input–output analysis," Economic Systems Research, Taylor & Francis Journals, vol. 32(4), pages 451-475, October.
  • Handle: RePEc:taf:ecsysr:v:32:y:2020:i:4:p:451-475
    DOI: 10.1080/09535314.2020.1784852
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    Cited by:

    1. Černý, Martin & Bruckner, Martin & Weinzettel, Jan & Wiebe, Kirsten & Kimmich, Christian & Kerschner, Christian & Hubacek, Klaus, 2024. "Global employment and skill level requirements for ‘Post-Carbon Europe’," Ecological Economics, Elsevier, vol. 216(C).
    2. Golinucci, Nicolò & Tonini, Francesco & Rocco, Matteo Vincenzo & Colombo, Emanuela, 2023. "Towards BitCO2, an individual consumption-based carbon emission reduction mechanism," Energy Policy, Elsevier, vol. 183(C).
    3. Pichler, Anton & del Rio-Chanona, R. Maria & Farmer, J. Doyne & Ives, Matthew & Bücker, Joris, 2023. "Employment dynamics in a rapid decarbonization of the power sector," INET Oxford Working Papers 2023-28, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    4. Yuli Shan & Jiamin Ou & Daoping Wang & Zhao Zeng & Shaohui Zhang & Dabo Guan & Klaus Hubacek, 2021. "Impacts of COVID-19 and fiscal stimuli on global emissions and the Paris Agreement," Nature Climate Change, Nature, vol. 11(3), pages 200-206, March.
    5. Luca TAUSCH & Guilherme MAGACHO, 2024. "Challenges in the Transition to a Low-Carbon Economy for Developing Countries: Estimating Capital-Use Matrices and Imported Needs," Working Paper 3f15bd28-99b0-42ff-863c-4, Agence française de développement.
    6. Liang, Junyi & Wang, Shaojian & Liao, Yuantao & Feng, Kuishuang, 2024. "Carbon emissions embodied in investment: Assessing emissions reduction responsibility through multi-regional input-output analysis," Applied Energy, Elsevier, vol. 358(C).
    7. G Tassinari & S Boccaletti & C Soregaroli, 2023. "Recycling sludge in agriculture? Assessing sustainability of nutrient recovery in Italy," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 50(5), pages 1633-1658.
    8. Kennedy, Christopher, 2022. "Capital, energy and carbon in the United States economy," Applied Energy, Elsevier, vol. 314(C).
    9. Nicolò Golinucci & Nicolò Stevanato & Negar Namazifard & Mohammad Amin Tahavori & Lamya Adil Sulliman Hussain & Benedetta Camilli & Federica Inzoli & Matteo Vincenzo Rocco & Emanuela Colombo, 2022. "Comprehensive and Integrated Impact Assessment Framework for Development Policies Evaluation: Definition and Application to Kenyan Coffee Sector," Energies, MDPI, vol. 15(9), pages 1-19, April.

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