Taiwan of grey water (polluted water) by sector, following the approach of Lenzen et al. (2007) and Gallego and Lenzen (2005). The procedure for apportioning producers’
and consumers’ responsibility for environmental impact is introduced as follows.
Gallego and Lenzen (2005) first proposed a consistent formulation of shared producer and consumer responsibility based on the generalized input-output theory (Leontief, 1970). In this section we briefly introduced the Gallego and Lenzen (2005) approach in apportioning responsibility for on-site produced environmental impact among producer and consumer. Figure 6 shows the supply-chain relationship between the economic agents of a three-sector economy of electricity (e), steel (s) and car(c).
Figure 7 shows the generalized input-output table of the three-sector economy, with national total produced environmental impact (CO2 emissions in this example), F, coming from on site of the electricity sector, Fe.
Figure 6. Supply chain of a hypothetical three-sector economy: electricity (e), steel (s), and car (c)
Source: Gallego and Lenzen (2005).
Electricity Steel Cars Final demand
Electricity
0 tes tec yeSteel
0 0 tsc 0Cars
0 0 0 ycPrimary inputs
ve 0 vc
CO
2emissions
Fe 0 o
Figure 7. Generalized Input-Output table of the hypothetical three-sector economy Source: Gallego and Lenzen (2005).
Eq.
1 indicates that 100% of the responsibility is attributed to the producer on site of CO2 emissions, Fe p , that is, the electricity sector. fe is the CO2 emissions
associated with per-unit output of electricity; xe is the output of electricity. Eq.
2
indicates that 100% of the responsibility,
F
j c, is attributed to the final consumer for their consumption of commodity j, yj, that uses electricity as input and thus be responsible for the CO2 embodied.
p
New formulation of the responsibility splitting starts below. Eq.
3 shows that
Eq. 4 shows the allocation of responsibility associated with sector k’s output,
x .
k Consumer is made accountable for a fraction of y
k for its final consumption.Sector k itself accounts for
1
yk
1
xk yk
for final consumption and the intermediate demand. Downstream sectors j are made accountable for
xk yk
.
assigned to final consumers of sector k
1 1 assigned to industry k
assigned to sectors j downstream from k
k
Eq. 5 follows similar allocation rule as in Eq.
4 to further allocation of responsibility released from sector k to downstream sector j, according to the input-output coefficient,
a .
kj
2assigned to final consumers of sector j
1 1 assigned to industry j
assigned to sectors i downstream from j
kj j
The same distribution process is repeated at each stage downstream along the supply chain. Eq.
6 summarized the responsibility of a given sector i for buying from a upstream sector k as
l
ki y
i , which correspond to the derivation of LeontiefFor a given sector i on the supply chain, its upstream shared responsibility, Fi , is summarized as Eq.
7.
i k
f
k kiy
iF
l
(Eq. 7)Summing all the downstream sectors i’s shared responsibility, as Eq.
8 does, would give rise to the total upstream responsibility for the total environmental impact, F, from production.
Applying this responsibility sharing mechanism to the hypothetical economy as Figures 6 and 7, the electricity produced CO2 emissions, which is also the national total, F, will be shared between the sectors along the supply chain, as Eq.
9 indicates.
That is, the electricity sector is responsible for Fe , the steel sector responsible for
Following the aforementioned allocation procedure, the electricity sector’s responsibility would be calculated as Eq.
10; the steel sector’s responsibility calculated as Eq.
11; and the car sector’s responsibility calculated as Eq.
12;
( ) ( ) ( )
(1 )
s e es s e es s
F f l y fa x
(Eq. 11)
( ) ( ) ( ) 2
( )
c e ec c e ec es sc c
F f l y f a a a y
(Eq. 12)
Figure 8 illustrates the multiple layers of responsibility sharing downstream along the supply chain. For a given sector, horizontal sum of the multiple layers of shared responsibility would give the shared responsibilities respectively for the electricity sector, Fe , the steel sector, Fs , and the car sector, Fc . The portion
e e
f y
in Fe is allocated to final consumer. Similarly, a
portion ofresponsibility associated with car final demand, yc, is allocated to final consumers and the rest goes to the car sector.
Figure 8. Downstream re-allocation of responsibility for an initial impact (fexe) as upstream responsibilities to intermediate and final consumers (FD) Source: Gallego and Lenzen (2005).
The values of and
range between 0 and 1. If is set at 0, producer takes 100% of the responsibility. If
is set at 1, consumer takes 100% of theresponsibility. In addition, this approach manifests the property that the more distant a given receiving agent is away from the supplier, the less responsibility will be
supplier.
Value specification of the and
transfer parameters could be chosen by the policymaker with a legitimate reasoning. Wiedmann and Lenzen (2006) use value added as a proxy for the
1
responsibility retention parameter, with thereasoning that value added of the sector reflects the capability of control and knowledge on the production process—the more knowledgeable and capable the producer is in its production, the more responsibility the producer should be ascribed with.
Table 1 shows an example of sharing the responsibility for on-site CO2 emissions along a hypothetical supply chain with sand mining, glass making, glass container making, and food processing sectors, and the final consumer. The retained
responsibility share (RR) is specified according to the ratio of value added to its net output. Figure 9 illustrates the responsibility transfer along the supply chain for each on-site emissions. The blue column of the left-hand bar for each sector indicates on-site emissions. The patterned column of the right-hand bar for each sector indicates the share transferred from one supplier to the next downstream buyer. The purple column of the right-hand bar for each sector indicates the retained
responsibility with the sector itself. Figure 10 shows the reshuffled shared
responsibility for all on-site CO2 emissions along the supply chain, as opposed to the sector-specific on-site emissions distribution (Figure 11). This hypothetical example of shared responsibility looks more convincing when one is to urge producers and consumer to be environmentally mindful.
Input-Output Accounts have been used for calculating the production-based environmental impact (e.g., pollution) as well as consumption-based ecological footprint accounting (see Wiedmann (2009) for an extensive survey of literature).
Most countries compile extended input-output accounts (with environmental satellite accounts) for their national emissions estimation. Figure 12 shows the EUROSTAT estimation of CO2 emissions according either producer perspective or consumer perspective, with the concept of embodied emissions associated with imports and exports. However, either accounting principle does not offer producers and consumers enough incentive for being environmentally mindful. Environmental policies based on such emissions accounting principles could easily lead to unwelcome consequence, such as carbon leakage caused by carbon offshoring by overseas relocation of production, that end up not helping with environmental impact mitigation.
Table 1. Example of CO
2emissions responsibility sharing along a hypothetical supply chain
Sand mining Glass making Glass container making
Food processing
Final consumer
Value added (VA) [$m] 0.4 1.6 2.1 16.0
Net output (NO) [$m] 1.6 3.2 5.3 21.3
RR = VA/NO 0.25 0.50 0.40 0.75
These values define the proportion of ‘retained responsibility’, i.e.:
Responsibility share 25% retained, 75% passed on
50% retained, 50% passed on
40% retained, 60% passed on
75% retained, 25% passed on
On-site CO2 emissions [t] 2000 5000 1000 400
CO2 received [t] 1500 3250 2550 738
On-site plus received emissions are then split up according to the proportions above:
CO2 retained [t] 500 3250 1700 2213 738
CO2 passed on [t] 1500 3250 2550 738
Source: Wiedmann and Lenzen (2006).
0 1000 2000 3000 4000 5000 6000 7000 8000
CO2 emissions [t]
Figure 9. Process of transferring responsibility for on-site emissions along the supply chain
Source: Wiedmann and Lenzen (2006).
0 1000 2000 3000 4000 5000 6000 7000 8000
CO2 emissions [t]
Figure 10. Reshuffled shared responsibility for all on-site CO2 emissions along the supply chain
Source: Wiedmann and Lenzen (2006).
0 1000 2000 3000 4000 5000 6000 7000 8000
CO2 emissions [t]
Figure 11. Sector-specific on-site CO2 emissions along a supply chain.
Source: Wiedmann and Lenzen (2006).
Figure 12. Domestic and global CO2 emissions – production and consumption perspective, EU27 2006 (tonnes per capita)
Source: EUROSTAT (2012).
Table 2. Summaries of responsibilities for New Zealand's domestic greenhouse gas emissions using three perspectives: (A) producer responsibility, (B) consumer responsibility, and (C) shared responsibility
Sector
Source: Andrew and Forgie (2008).
Table 2 shows the Andrew and Forgie (2008) comparison of sectoral
responsibility allocation of New Zealand’s domestic greenhouse gases emissions based on (a) producer accounting principle, (b) consumer accounting principle and (c) shared responsibility principle as proposed by Lenzen et al. (2007). Both producer accounting and consumer accounting principle give rather biased allocation of emission responsibility. The share responsibility principle would apportion more evenly among all the sectors involved in the supply chain, with both producers’ and consumers’ responsibilities reduced and foreign buyers taking some portion of New Zealand’s environmental responsibility. The shared responsibility approach proves to be favorable for an economy like New Zealand that exports in bulk emission-intensive products (e.g., meat products) to be partially absolved of its produced environmental impact. Lenzen and Murray (2010) summarizes with Table 3 the matching vocabulary for upstream and downstream responsibilities for better conceptual comprehension of this approach.
Table 3 Matching vocabulary for upstream and downstream responsibilities.
Upstream Downstream
Emissions are caused by our because we which enables
suppliers,
buy from our suppliers, our suppliers
customers,
sell to our customers,
our customers to operate.
We are responsible for the
emissions that we enable by our purchases. enable by our sales.
We are responsible for
emissions embodied in our purchases. enabled by our sales.
The more we buy form our suppliers, sell to our customers, the more we are responsible for their emissions.
Our responsibility is
calculated from the fraction of our purchases in the output of our
suppliers, and our suppliers’
emissions.
the fraction of our sales in the input of our customers, and our customers’ emissions.
Ultimate responsibility rests
with upstream buyers of final outputs (eg households)
downstream sellers of primary inputs (eg workers and investors)
Source: Lenzen and Murray (2010).