EIOLCA
Encyclopedia
Economic input-output life cycle assessment
, or EIO-LCA involves use of aggregate sector-level data quantifying how much environmental impact can be directly attributed to each sector of the economy and how much each sector purchases from other sectors in producing its output. Combining such data sets can enable accounting for long chains (for example, building an automobile requires energy, but producing energy requires vehicles, and building those vehicles requires energy, etc.), which somewhat alleviates the scoping problem of traditional LCA. EIO-LCA analysis traces out the various economic transactions, resource requirements and environmental emissions (including all the various manufacturing, transportation, mining and related requirements) required for producing a particular product or service.
EIO-LCA relies on sector-level averages that may or may not be representative of the specific subset of the sector relevant to a particular product. To the extent that the good or service of interest is representative of a sector, EIOLCA can provide very fast estimates of full supply chain implications for that good or service.
(who won a Nobel Prize
in 1973). It quantifies the interrelationships among sectors of an economic system, enabling identification of direct and indirect economic inputs of purchases. This concept was extended by including data about environmental and energy analysis from each sector to account for supply chain
environmental implications of economic activity.
represents the amount that sector 
purchased from sector 
in a given year and 
is the "final demand" for output from sector 
(i.e., the amount of output purchased for consumption, as opposed to purchased by other businesses as supplies for more production), then the total output 
from sector 
includes output to consumers plus output sold to other sectors:
If we define
as the normalized production for each sector, so that 
, then
In vector notation
This result indicates that knowing only the final demand from each sector
and the normalized IO matrix 
, one can calculate the total implied production 
from each sector of the economy. If data are available on a particular emissions release (or other attribute of interest) from each sector of the economy, then a matrix 
can be compiled to represent various releases (columns) per $ output from each sector (rows). Total additional emissions 
associated with additional final demand of 
can then be calculated as:
This simple result enables very quick analysis, taking into account releases associated with the entire supply chain requirements needed to provide a specific final demand, on average. The equations are based on average data in the current economy, but they can be used to make predictions for marginal changes in output (such as one more unit of a particular product) if
Finally, if the researcher has estimates for valuation of externality
costs associated with each item in
(or, alternatively, if weighting coefficients are available that represent the relative importance of each item in 
, using ecological indicator
s, for example) then the externality costs (or weights) per unit of releases could be compiled into a vector
in order to calculate the scalar "environmental impact metric" 
:
Generally there is wide uncertainty associated with estimates of
, so such aggregation should be done only with care, including sensitivity analysis
. Typically, researchers examine specific elements of
rather than attempting to aggregate.
The big picture result is that by collecting data on average economic sector transactions
and average sector emissions 
, it is possible to make quick predictions about the full supply chain emissions associated with a product of interest by representing the product as marginal changes in production from relevant sectors 
.
This article uses text from Design Decisions Wiki under the GFDL.
Life cycle assessment
A life-cycle assessment is a technique to assess environmental impacts associated with all the stages of a product's life from-cradle-to-grave A life-cycle assessment (LCA, also known as life-cycle analysis, ecobalance, and cradle-to-grave analysis) is a technique to assess environmental impacts...
, or EIO-LCA involves use of aggregate sector-level data quantifying how much environmental impact can be directly attributed to each sector of the economy and how much each sector purchases from other sectors in producing its output. Combining such data sets can enable accounting for long chains (for example, building an automobile requires energy, but producing energy requires vehicles, and building those vehicles requires energy, etc.), which somewhat alleviates the scoping problem of traditional LCA. EIO-LCA analysis traces out the various economic transactions, resource requirements and environmental emissions (including all the various manufacturing, transportation, mining and related requirements) required for producing a particular product or service.
EIO-LCA relies on sector-level averages that may or may not be representative of the specific subset of the sector relevant to a particular product. To the extent that the good or service of interest is representative of a sector, EIOLCA can provide very fast estimates of full supply chain implications for that good or service.
Background
Economic input-output analysis was developed by Wassily LeontiefWassily Leontief
Wassily Wassilyovich Leontief , was a Russian-American economist notable for his research on how changes in one economic sector may have an effect on other sectors. Leontief won the Nobel Committee's Nobel Memorial Prize in Economic Sciences in 1973, and three of his doctoral students have also...
(who won a Nobel Prize
Nobel Prize
The Nobel Prizes are annual international awards bestowed by Scandinavian committees in recognition of cultural and scientific advances. The will of the Swedish chemist Alfred Nobel, the inventor of dynamite, established the prizes in 1895...
in 1973). It quantifies the interrelationships among sectors of an economic system, enabling identification of direct and indirect economic inputs of purchases. This concept was extended by including data about environmental and energy analysis from each sector to account for supply chain
Supply chain
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to...
environmental implications of economic activity.
Theory
Input-output transactions tables, which track flows of purchases between sectors, are collected by the federal government in the United States. EIO works as follows: If represents the amount that sector purchased from sector in a given year and is the "final demand" for output from sector (i.e., the amount of output purchased for consumption, as opposed to purchased by other businesses as supplies for more production), then the total output from sector includes output to consumers plus output sold to other sectors:If we define
as the normalized production for each sector, so that , thenIn vector notation
This result indicates that knowing only the final demand from each sector
and the normalized IO matrix , one can calculate the total implied production from each sector of the economy. If data are available on a particular emissions release (or other attribute of interest) from each sector of the economy, then a matrix can be compiled to represent various releases (columns) per $ output from each sector (rows). Total additional emissions associated with additional final demand of can then be calculated as:This simple result enables very quick analysis, taking into account releases associated with the entire supply chain requirements needed to provide a specific final demand, on average. The equations are based on average data in the current economy, but they can be used to make predictions for marginal changes in output (such as one more unit of a particular product) if
- average output and marginal output are assumed to be sufficiently close (i.e., the impact of one more unit = the impact of the average unit), and
- the marginal change in final output
is representative of the product of interest (ex: if the product will use electricity from wind energy exclusively, then using the electricity sector, which is dominated by coal, would yield a poor estimate).
Finally, if the researcher has estimates for valuation of externality
Externality
In economics, an externality is a cost or benefit, not transmitted through prices, incurred by a party who did not agree to the action causing the cost or benefit...
costs associated with each item in
(or, alternatively, if weighting coefficients are available that represent the relative importance of each item in , using ecological indicatorEcological indicator
Ecological indicators are used to communicate information about ecosystems and the impact human activity has on ecosystems to groups such as the public or government policy makers. Ecosystems are complex and ecological indicators can help describe them in simpler terms that can be understood and...
s, for example) then the externality costs (or weights) per unit of releases could be compiled into a vector
in order to calculate the scalar "environmental impact metric" :Generally there is wide uncertainty associated with estimates of
, so such aggregation should be done only with care, including sensitivity analysisSensitivity analysis
Sensitivity analysis is the study of how the variation in the output of a statistical model can be attributed to different variations in the inputs of the model. Put another way, it is a technique for systematically changing variables in a model to determine the effects of such changes.In any...
. Typically, researchers examine specific elements of
rather than attempting to aggregate.The big picture result is that by collecting data on average economic sector transactions
and average sector emissions , it is possible to make quick predictions about the full supply chain emissions associated with a product of interest by representing the product as marginal changes in production from relevant sectors .Software
The Economic Input Output-Life Cycle Assessment software, traces out the various economic transactions, resource requirements and environmental emissions associated with the production of a particular product or service. The model captures all the various manufacturing, transportation, mining and related requirements to produce a product or service. For example, you might wish to trace out the implications of purchasing $ 46,000 of reinforcing steel and $ 104,000 of concrete for a kilometer of roadway pavement. Environmental implications of these purchases can be estimated using EIO-LCA. The current (1997) model is based upon the Department of Commerce's 491 sector industry input-output model of the US economy.This article uses text from Design Decisions Wiki under the GFDL.