Beyond production and consumption: using throughflows to untangle the virtual trade of externalities

Economic Systems Research, vol. 35, pp. 376–396

Abstract

Understanding how countries contribute to the generation of externalities globally is important for designing sustainable policies aimed at reducing negative externalities such as carbon emissions. Commonly used approaches focus on either producers or consumers, thereby neglecting the role of intermediates. We here introduce the concept of throughflow to comprehensively quantify upstream externalities generated by the supply chains originating from, passing through or ending in a given country. We define the Throughflow Based Accounting (TBA) framework as the decomposition of the throughflow into local, imported, exported and traversing externalities. We illustrate the strength of the TBA by identifying the CO2 emissions caused by supply chains involving the German economy. We show that Germany could use its position in global value chains to help reduce two times more CO2 emissions than measured with usual production- or consumption-based accounting frameworks.

Authors 4

1. Timothé Beaufils corresponding

   University of Potsdam · Leibniz Association · Potsdam Institute for Climate Impact Research

   Affiliation as printed

   Institute of Physics, Potsdam University, Potsdam, Germany

   Potsdam Institute for Climate Impact Research (PIK), Member of the Leibniz Association, Potsdam, Germany

2. Etienne Berthet

   Technical University of Denmark

   Affiliation as printed

   Section for Quantitative Sustainability Assessment, Department of Technology, Management and Economics, Technical University of Denmark, Kongens Lyngby, Denmark

3. Hauke Ward Aachen Institute of Environmental Science Department of Industrial Ecology

   Leiden University · Mercator Research Institute on Global Commons and Climate Change

   Affiliation as printed

   Institute of Environmental Science (CML), Department of Industrial Ecology, Leiden University, Leiden, Netherlands

   Mercator Research Institute for Global Commons and Climate Change, Berlin, Germany

4. Leonie Wenz

   Leibniz Association · Mercator Research Institute on Global Commons and Climate Change · Potsdam Institute for Climate Impact Research

   Affiliation as printed

   Mercator Research Institute for Global Commons and Climate Change, Berlin, Germany

   Potsdam Institute for Climate Impact Research (PIK), Member of the Leibniz Association, Potsdam, Germany