Carbon 'hot-spots' in global supply chains: an inter-regional input-output analysis

Input-Output (IO) frameworks have been extensively used to study anthropogenic CO2 emissions within single economies or globally. This is usually done through the calculation of headline figures like the Production and Consumption Accounting Principles (PAP and CAP), which in turn leads to a lack of transparency on the structure of emissions and limits the information available on the drivers of those emissions. To overcome these limitations, we decompose the standard Environmental Inter-Regional Input-Output (EIRIO) headline calculations, drawing on the OECD Inter-Country IO tables. We show how this facilitates consideration of downstream demands driving the production and associated CO2 emissions at specific industrial ‘hot-spots’ outside the borders of individual regions/territories under study. The results for a UK study reveal how domestic final demand can drive the generation of emissions outside the UK’s territorial boundaries (despite the fact that the majority of emissions are generated within its borders). The combined Chinese ‘Electricity, Gas and Water Supply’ sector is identified as a major direct emitter of CO2 in the global supply chain of other industries (including UK-based ones) serving UK final demands. Furthermore, the UK ‘Health and Social Work’ sector is revealed to have the second largest CO2 footprint driven by UK final demand, amongst all production sectors in all countries. However, it is found to have numerous CO2 ‘hot-spots’ in its international upstream supply chain, highlighting the impact of UK’s ‘Health and Social Work’ sector on generation of emissions in the UK’s trading partners.