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Greenhouse Gas Estimation

This page details the methodology behind the Scottish Government Environmentally extended Input-Output model (EIO). This was developed during 2009 to estimate the Greenhouse Gas (GHG) reported in the first High Level Carbon Assessment of the Scottish Draft Budget 2010/11, published in September 2009.

The latest 2017/18 Carbon Assessment uses the same underlying Environmental Input-Output Model as that used for the 2016/17 Carbon Assessment. The only change made has been to use the latest available Greenhouse Gas emissions estimates (ONS Environmental Accounts, July 2016) and HM Treasury deflators (November 30th 2016).

GHG Effects estimates, based on this latest model are available in 2017/18 prices.

Background

In 2008 the Cabinet Secretary for Finance and Sustainable Growth made a commitment to publish estimates of the Green House Gas emissions associated with the planned government spending as detailed in the Scottish Government Draft Budget, scheduled for publication in September 2009.

A range of experts acknowledged in evidence to the Transport, Infrastructure and Climate Change Committee that the carbon assessment of spend is a complex process and that there is no single recognised estimation methodology. Recognising the challenging nature of the task, the Scottish Government convened an expert workshop at the end of November 2008 to discuss the merits and limitations of different methodologies, and identify the most appropriate way forward. Having considered a number of possibilities, Environmental Input-Output (EIO) analysis was identified by the contractors as providing the best option to provide a high level assessment of the impact of Government spending on emissions.

From 2010, there is a statutory requirement for the Scottish Government to publish GHG emissions estimates alongside their spending plans.

Scottish Draft Budget 2017/18 High Level Carbon Assessment December 15th 2016
Scottish Draft Budget 2016/17 High Level Carbon Assessment December 16th 2015
Scottish Draft Budget 2015/16 High Level Carbon Assessment October 9th 2014
Scottish Draft Budget 2014/15 High Level Carbon Assessment September 11th 2013
Scottish Draft Budget 2013/14 High Level Carbon Assessment September 20th 2012
Scottish Draft Budget 2012/13 High Level Carbon Assessment September 21st 2011
Scottish Draft Budget 2011/12 High Level Carbon Assessment November 17th 2010
Scottish Draft Budget 2010/11 High Level Carbon Assessment September 17th 2009

Methodology Overview

Overview of the Input-Output model (see User Guide for more detail)

Input-Output (IO) is a generic term used to refer to a class of statistical tables within the IO framework. The tables provide a complete picture of the flows of goods and services in the economy for a given year. They detail the relationship between producers and consumers and the interdependencies of industries.

Supply and Use Tables are constructed directly from survey and other data sources. The Supply Table provides estimates of the output of a large number of differentiated products by each industry and the Use Table provides estimates of the inputs (of products and services) used by each industry to produce their own output.

Symmetric tables (a.k.a. analytical tables) are derived from the supply and use tables and represent the modelling aspect of the IO framework.

In this analysis, the symmetric industry-by-industry Leontief inverse tables have been used to estimate total industrial output as a result of changes in final demand.

For given changes in final demand (taken as Scottish Government spending here), the Leontief type I table is used to show, for each industry, the direct and indirect effects upon total output of an additional £1m of final demand. The direct effect is the increase in the output of a particular industry from an increase in final demand from that industry as producers react to meet the increased demand. The indirect effect is the increase in demand for their suppliers and so on down the supply chain as producers increase their output.

The Environmental Input-Output model

The Input-Output methodology estimates the indirect output changes as a result of changes in final demand. Average industry-level environmental data are then used to estimate the environmental impacts per £1m sold by an industry. This is the greenhouse gas ratio or the emissions in tonnes of Carbon Dioxide equivalent gases for each £1m of output. Since the tables detail inter-industry purchases, it is possible to estimate the overall carbon impact required to meet changes in final consumption by Government. Such extended tables are commonly referred to as Environmental Input-Output models. The application of IO models to assess environmental impacts is well established.

The high-level assessment of the Budget uses the Scottish Government Environmental Input-Output model for domestic emissions and a 'closed economy' UK model for emissions associated with imported goods and services. Ideally, country-specific IO tables and emission factors would be used for imports but the data required for such multi-region models were not available during the development of the Scottish Government EIO. The UKIO system is therefore used as a proxy, given that the rest of the UK is Scotland's largest trading partner. The latest Scottish EIO is based on Scottish Government Input-Output tables for 2010 (published August 2014), the UK EIO is based on the Office for National Statistics (ONS) Analytical Tables and Supply and Use Tables for 2010 (both consistent with Blue Book 2013). The emissions to output ratios are derived from ONS Environmental Accounts estimates of GHG emissions by industry for 2010 (published July 2016) applied to industrial output figures from ONS Supply and Use tables for 2010 (Blue Book 2013 consistent).

Since the Draft Budget planned spending relates to future years, all spending is deflated into 2010 prices before running the model. In the case of the latest published GHG effects - these are expressed in 2017/18 prices.

The published GHG effects detail the estimated direct and indirect greenhouse gas emissions (expressed in tonnes of carbon dioxide equivalent) as a result of £1m final demand from each of the 98 Input-Output industry categories.

EIO

 

Further information

The High Level Carbon Assessment of the Draft Budget 2010/11 details the background, scope, results and detailed methodology. A useful summary paper of the methods applied was published by the University of Strathclyde Fraser of Allander Institute Economic Commentary February 2010, Vol 33, No 3, see pages 48 to 54.

The methodology and appropriateness for use were discussed at the Transport, Infrastructure and Climate Change Committee, on September 29th 2009. Details can be found in the official transcript.

Since publication the methodology and results have been presented and discussed at the Scottish Institute for Research in Economics Policy Forum in December 2009 and January 2010 as well as the ESRC/BRASS/RSA Workshop on methods for regional carbon and waste accounting: Perspectives from Scotland and Wales.

If you would like any further information please contact the Scottish Government Input-Output team.