Hybrid IO Analysis of CO2 Emissions: An Application to the Portuguese Economy

Since the late 1980s, global climate change issues gained an ever-growing attention. The seriousness of the greenhouse effect is now widely recognized as one of the hottest topics in the world agenda. This poses important challenges. For one, global warming is a serious threat, pushing a shift of our mindset from economic growth to more eclectic approaches towards the sustainability of the resources base. Second, we lack effective mechanisms for decision making and policy implementation that encompass the complex interactions between environmental and economic activities.

The Leontief input-output model has been applied for macro environmental analysis since the 1970s. Using data for the Portuguese economy, this paper explores an extended environmental input–output model to study environment and economy interactions in order to support strategies that respect and promote a balanced management of the dynamics between energy supply, environmental protection and economic growth.

Thus, from the empirical analysis of primary energy flows, sets of energy intensity coefficients by industry, as well as the energy requirements attributable to given vectors of final demand, are estimated. Then, sources of anthropogenic CO2 Portuguese emissions and the share of sectors in total emissions are identified, relating this pollution with the use of fossil fuels. Besides, ‘CO2 responsibility’, which takes into account the CO2 content of imports, is estimated. The sectoral CO2 emissions and CO2 responsibilities are compared and these two notions are linked to foreign trade. Accordingly, a summary of the key lessons learned and a discussion of their policy relevance will be offered.

Keywords: Hybrid I-O Analysis; Energy Intensities; CO2 Emissions; CO2 Responsibility; Portugal.