Input-output analyses of the pollution content of intra- and inter-national trade flows

Abstract

This paper considers the application of input-output accounting methods to consider the pollution implications of different production and consumption activities, with specific focus on pollution embodied in intra-and inter-national trade flows. We consider the illustrative case studies of interregional trade flows between two regions of the UK and between five Mid-West regions/states within the US. We focus on different types of air pollutant of current policy concern in each case and demonstrate how use of the environmental input-output framework allows us to analyse the nature and significance of interregional pollution spillovers. Our results raise questions in terms of the extent to which authorities at regional level can control local emissions where they are limited in the way some emissions can be controlled, particularly with respect to changes in demand elsewhere within the national economy. This implies a need for policy co-ordination between national and regional level authorities to meet emissions reductions targets. Moreover, the existence of pollution trade balances between regions also raises issues in terms of net losses/gains in terms of pollutants as a result of interregional trade. In conducting analyses for different types of air pollutant (here CO2 as a global warming gas, GHG, in the UK case and ammonia, NH3, as a pollutant of more local concern in the US case) we also consider how pollution embodied in international trade flows may be accounted for and attributed.