Economic Structure and Strategies for Greenhouse Gas Mitigation

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IO Multiplier Approach

The first step in the research is to establish how important the expansion or contraction of various economic sectors is to economy-wide emissions. The expansion of a sector could be triggered by population growth or changes in consumption causing an increase in final demand and thus production. The relationship between production levels and economy-wide emissions can be described using an I-O multiplier approach. The emission-intensity coefficients for production can be expressed as a row vector () representing the direct emission effect per unit of output. However, an increase in production for one sector requires an increase in intermediate inputs from other sectors in the economy. Therefore, emissions will increase from all the sectors that work to fill the increased demand for intermediates. An emission multiplier effect () can be calculated using the Leontief inverse to show the emissions created in the overall economy, due to direct and indirect linkages with other economic sectors, resulting from a £million increase in output for a given sector.


The emission multiplier effect is measured in relation to the direct emission effect in an economic sector, to define an emission multiplier. Alternatively, we can define an elasticity measure,, that describes the percent change in economy-wide emissions given a one percent change in production (w) for sector j.


The larger the value of the greater the impact changes in production will have on total emissions.

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