Multi-region input-output analysis of CO2 emissions embodied in trade: The feedback effects

Energy-related CO2 emissions embodied in international trade have been widely studied by researchers using the environmental input-output framework. Despite the increasing interest in using the multi-regional input-output (MRIO) model by researchers, few studies have looked into the mechanism of feedback effects. We introduce a method called the stepwise distribution of emissions embodied in trade (SWD-EET) to reveal how the emissions embodied in trade are absorbed by a country's final demands through a series of allocation steps. A country's indirect absorption patterns and its indirect trade balance of emissions from bilateral trade with other countries are also studied based on the proposed method. An empirical study using the data of Asian economies shows significant differences in the “consumption-based” emission estimates for some economies due to feedback effects through international trade. The differences can be largely captured by the first step or the first two steps of the adjustment procedure in the SWD-EET analysis. Other findings and some recommendations are also presented.

► We study the mechanism of feedback effects in the embodied emission studies. ► We introduce a method called the stepwise distribution of emissions embodied in trade (SWD-EET). ► We study a country's indirect absorption patterns and its indirect trade balance of emissions. ► The differences in two “consumption-based” emission estimates come from feedback effects.