LINKING CLIMATE POLICY, INDUSTRIAL

STRUCTURE, AND GHG EMISSIONS IN A

GLOBAL FRAMEWORK

Nick Johnstone OECD Directorate for Science, Technology and Innovation COP21 side event, Le Bourget , 3 December 2015

Why ICIO for Carbon?

2

• Accounting system recommended by IPCC is based on place of emission

• Could be said to be broadly consistent with OECD “polluter pays principle”* but important and persistent point of contention in identifying “polluter”

• Consumption-based accounting can be a helpful analytical complement

• Particularly in the context of carbon (in distinction to most other environmental pressures):

– Global public bad (place of emission is irrelevant)

– “Relative” ease of attributing (input=>emission)

– Significant differentiation in policy frameworks

* OECD Recommendation on Guiding Principles Concerning the International Economic Aspects of Environmental Policies, C(72)128, par 4

Why TiVA for Carbon?

3

• For reasons of policy efficiency and effectiveness policymakers have an interest in knowing:

– What the level of their consumption-based emissions are relative to production-based emissions

– And, how the relationship between the two changes with differences in policy regimes across countries.

• Analysis based on gross trade flows at the sectoral level provide little guidance – point of incidence of policy is often more granular and production processes are increasingly fragmented

• Two important extensions:

– How to address if deviations are large (and increasing) – both sticks (carbon-based BTA) and carrots (ITAs)

– Implications for allocation of “responsibility” in context of international agreements (i.e. common but differentiated responsibility) – or even regional allocation within a country (China)

OECD ICIO ANALYSIS:

HISTORY, CONCEPTS AND RESULTS

Norihiko Yamano OECD Directorate for Science, Technology and Innovation Linking climate policy, industrial structure, and GHG emissions in a global framework, COP21 side event, Le Bourget , 3 December 2015

CO2 emissions from fuel combustions

5

• Territorial –based (by flow & product)

• Production-based (by industry & household)

• Consumption-based (by final demand type)

• Emissions embodied in gross exports and imports (footprint by exported and imported product)

CO2 emissions from fuel combustion

6

Territorial, production, consumption and

gross export-based emissions

7

• Methodology:

CO2 multiplier is estimated by multiplying the intensities of the production-based emissions by sector with the global Leontief Inverse from ICIO

note: Production-based emissions and foreign final demand are adjusted for “expenditures by non-residents in domestic territories”

• Coverage

– 61 Countries + Rest of the world (with flexible regional aggregates e.g. EU28, ASEAN)

– 34 industries (two digit ISIC Rev. 3 – based)

• Main data sources

– OECD ICIO

– IEA CO2 emissions from fuel combustion

OECD CO2 embodied in trade (2015ed)

8

Production-based and consumption-

based emissions (1995-2011)

9 http://oe.cd/io-co2

Net CO2 imports: selected countries

10 http://oe.cd/io-co2

OECD Non-OECD

Flow and Stock

11

Flow 2011

Stock 1995-2011

Emissions embodied in exported products

by product (Mton CO2 and share%, 2011)

12

The global discrepancy: Convergence

in CO2 intensity per unit export

13

Per capita production-based and consumption-based

emissions by product (G7 and selected countries, 2011)

14 http://oe.cd/io-co2

Summary: “CO2 intensive sectors”

15

• Territorial –based (by product and flow) Fuel type: Coal, oil, gas

Flow: electricity, transport

• Production-based (by industry & household) Electricity, manufacturing

• Consumption-based (by final demand type) Manufacturing, services

• Emissions embodied in gross exports and imports (footprint by exported product) Products: Material manufacturing and machinery

Country: Emerging, G7s

OECD ICIO ANALYSIS:

EMBODIED CARBON AND CLIMATE POLICY

Kirsten Wiebe OECD Directorate for Science, Technology and Innovation Linking climate policy, industrial structure, and GHG emissions in a global framework, COP21 side event, Le Bourget , 3 December 2015

Annex I and non-Annex I countries

The difference between production-based and

consumption-based emissions

http://oe.cd/io-co2

0

2

4

6

8

10

12

199

5

199

6

199

7

199

8

199

9

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Development of global CO2 emissions (in Gt) non-AnnexI prod

non-AnnexI cons

China prod

China cons

AnnexI cons

AnnexI prod

USA cons

USA prod

-1.5

-1

-0.5

0

0.5

1

1.5

199

5

199

6

199

7

199

8

199

9

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Net-imports in Gt

• Environmental policy stringency (EPS)

– Percentage of environmental taxes in total tax revenue

– Percentage of environmental taxes in GDP

• Correlation analysis

• Sample (policy data available for almost all countries in ICIO)

– Pairwise bilateral

– Pairwise only Annex I countries relative to non-Annex I countries

Annex I and non-Annex I countries

Qualitative (preliminary) results do not provide

evidence of significant policy-induced leakage

Embodied CO2 Environmental policy stringency

Domestic CO2 embodied in domestic FD or Exports

Partner′s CO2 embodied in domestic FD or Exports

Domestic EPS

Partner′s EPS

Domestic CO2 embodied in domestic FD or Exports

Total CO2 embodied in domestic FD or Exports

Domestic EPS

Average partner′s EPS

Individual country perspective

Germany (stringent environmental policies)

0

200

400

600

800

1000

1200

199

519

96

199

719

98

199

92

00

02

00

12

00

22

00

32

00

42

00

52

00

62

00

72

00

82

00

92

010

20

11

Germany's emissions (Mio t CO2)

Consumption-based

Production-based

Net-imports

http://oe.cd/io-co2

0

200

400

600

800

1000

1200

199

5

199

6

199

7

199

8

199

9

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Origin of consumption-based emissions (Mio t CO2)

Domestic

Annex I

Emissions embodied in final demand

Emission of foreign origin – top 10 final demand industries

~ 2 3 of total emissions of foreign origin

~ 3 4 of total consumption-based emissions

Individual country perspective: Germany

Consumption based emissions by final demand industry

0

50

100

150

200

250

300

Mil

lio

n t

on

ne

s C

O2

2011 domestic

2011 foreign

http://oe.cd/io-co2

Germany’s demand for motor vehicles Origin of emissions by country and industry – 2011 hotspots

Industries Chemicals Non-metallic minerals Basic metals Motor vehicles Electricity, gas and water supply (Utilities)

CO2 hotspot countries

http://oe.cd/io-co2

Germany’s demand for motor vehicles CO2 intensities of hotspots

Germany’s CO2 intensities are smaller than everyone else’s Why?

http://oe.cd/io-co2

Germany’s demand for motor vehicles Energy mix of hotspots

Germany’s energy mix has a low share of CO2 intensive energy carriers Again: Why? Policies? Technology?

http://oe.cd/io-co2

0%10%20%30%40%50%60%70%80%90%

100%

DEU CZE POL USA CHN IND RUS

Chemicals

0%10%20%30%40%50%60%70%80%90%

100%

DEU CZE POL USA CHN IND RUS

Basic metals

0%10%20%30%40%50%60%70%80%90%

100%

DEU CZE POL USA CHN IND RUS

Electricity, gas and water supply (Utilities)

Comb. Renewables

Solar/wind/other

Geothermal

Hydro

Nuclear

Natural gas

Oil

Crude/NGL/feedst

Peat

Coal

• Indicators need to be comparable across countries and time

• Policy indicators – Identify relevant policy areas

– Identify relevant policy measures

– Quantify their impact

• Technology indicators – Identify technological differences across countries

– Identify current and possible technology diffusion

How can we measure the relation between

embodied CO2, policies and technologies?

Policy influence

• Energy/climate policies

– Successful voluntary agreements with industry since 1997 (Chemicals, various non-metallic minerals, NF metals, iron and steel, gas, oil, electricity, CHP )

– Renewable Energies Act (EEG)

• R&D policies

– Environmental innovation programme

Germany’s demand for motor vehicles

Policies and technology

Technology influence

• Less CO2 intensive energy mix

• Cleaner production processes?

• But: Production of different products in same industries in different countries?

Policy transfer? Technology diffusion?

• A starting point for developing policy indicators

Policy databases’ reported first year / year of increasing activity of climate change mitigation policies

IEPD Industrial Efficiency Policy Database

IEA Policies & Measures database

Germany’s demand for motor vehicles

Climate change mitigation policies

IEPD IEA

Germany 1997 1977 / 1990

Czech Republic 1994 / 2001

Poland 1991 / 2001

United States 1975 1974 / 1990

China 2004 1996 / 2002

India 1999 / 2001

Russia 2010 2001 / 2008

Germany’s demand for motor vehicles

Technology collaboration & change in CO2 intensity

http://oe.cd/io-co2 http://dotstat.oecd.org/Index.aspx?DataSetCode=PAT_COL#

Technology collaboration with Germany and the change in CO2 intensity of utilities industry

Germany’s demand for motor vehicles

Technology collaboration & change in CO2 intensity

http://oe.cd/io-co2 http://dotstat.oecd.org/Index.aspx?DataSetCode=PAT_COL#

Technology collaboration with Germany (DEU) / with Annex I countries and the change in CO2 intensity of utilities industry

• How to construct climate policy indicators to be used with ICIO analysis results?

• (How) can we use consumption-based CO2 accounts to better identify – Policy transfer opportunities and necessities?

– Technology diffusion opportunities?

• Is it at the bilateral industry perspective or country/regional final demand perspective?

• Would a well design technology transfer have a greater impact than any monetary transfer mechanism?

Going forward

• OECD work on trade in carbon dioxide emissions (data and methodology) http://oe.cd/io-co2

• OECD.ICIO http://www.oecd.org/trade/input-outputtables.htm

• Trade in Value Added http://oe.cd/tiva

• OECD STI Scoreboard 2015 http://www.oecd.org/sti/scoreboard.htm

Further readings and databases

30

Thank you!

Code LabelE Short labels

TOTAL TOTAL Total

01T05 Agriculture, hunting, forestry and fishing Agriculture

10T14 Mining and quarrying Mining

15T16 Food products, beverages and tobacco Food products

17T19 Textiles, textile products, leather and footwear Textiles & apparel

20 Wood and products of wood and cork Wood

21T22 Pulp, paper, paper products, printing and publishing Paper, print, publsh

23 Coke, refined petroleum products and nuclear fuel Coke, petroleum

24 Chemicals and chemical products Chemicals

25 Rubber and plastics products Rubber & plastics

26 Other non-metallic mineral products Non-metallic minerals

27 Basic metals Basic metals

28 Fabricated metal products Fabricated metals

29 Machinery and equipment, nec Machinery

30,32,33 Computer, Electronic and optical equipment ICT & electronics

31 Electrical machinery and apparatus, nec Electrical machinery

34 Motor vehicles, trailers and semi-trailers Motor vehicles

35 Other transport equipment Other transport

36T37 Manufacturing nec; recycling Other manufacturing

40T41 Electricity, gas and water supply Utilities

45 Construction Construction

50T52 Wholesale and retail trade; repairs Wholesale & retail

55 Hotels and restaurants Hotels & restaurants

60T63 Transport and storage Transport & storage

64 Post and telecommunications Post & telecoms

65T67 Financial intermediation Finance & insurance

70 Real estate activities Real estate

71 Renting of machinery and equipment Renting of machinery

72 Computer and related activities IT services

73, 74 R&D and other business activities Other business services

75 Public admin. and defence; compulsory social security Public admin

80 Education Education

85 Health and social work Health

90T93 Other community, social and personal services Other services

95 Private households with employed persons Private households

ICIO industry classification ISIC Rev 3

1 AUS Australia 22 NLD Netherlands 43 HKG Hong Kong SAR

2 AUT Austria 23 NZL New Zealand 44 HRV Croatia

3 BEL BELGIUM 24 NOR Norway 45 IDN Indonesia

4 CAN Canada 25 POL Poland 46 IND India

5 CHL Chile 26 PRT Portugal 47 KHM Cambodia

6 CZE Czech Republic 27 SVK Slovak Republic 48 LTU Lithuania

7 DNK Denmark 28 SVN Slovenia 49 LVA Latvia

8 EST Estonia 29 ESP Spain 50 MLT Malta

9 FIN Finland 30 SWE Sweden 51 MYS Malaysia

10 FRA France 31 CHE Switzerland 52 PHL Philippines

11 DEU Germany 32 TUR Turkey 53 ROU Romania

12 GRC Greece 33 GBR United Kingdom 54 RUS Russian Federation

13 HUN Hungary 34 USA United States 55 SAU Saudi Arabia

14 ISL Iceland 35 ARG Argentina 56 SGP Singapore

15 IRL Ireland 36 BGR Bulgaria 57 THA Thailand

16 ISR Israel 37 BRA Brazil 58 TUN Tunisia

17 ITA Italy 38 BRN Brunei Darussalam 59 TWN Chinese Taipei

18 JPN Japan 39 CHN China 60 VNM Viet Nam

19 KOR Korea 40 COL Colombia 61 ZAF South Africa

20 LUX Luxembourg 41 CRI Costa Rica 62 RoW Rest of the world

21 MEX Mexico 42 CYP Cyprus

ICIO country coverage