Data sources and methods carbon dioxide emissions from a consumption perspective indicator: chapter 4

4. Methods

The consumption-based carbon dioxide (CO₂) emissions presented in the indicator were developed by the Organisation for Economic Co-operation and Development. The Organisation for Economic Co-operation and Development used a Multi-Regional Input-Output model. This approach relies on input-output tables from national accounts coupled with national emissions data allocated to industries. The approach focuses on the emissions generated to supply and use a specific product or service (including those of all products and services used as intermediate inputs), but does not include emissions associated with disposal.

To develop its data set, the Organisation for Economic Co-operation and Development combined data from its Inter-Country Input-Output Tables with the International Energy Agency's CO₂ Emissions from Fuel Combustion - 2014 Edition.

4.1 Carbon dioxide emissions from fuel combustion by industry

The International Energy Agency's CO₂ Emissions from Fuel Combustion estimates are based on its energy data^{Footnote [1]} and the default methods and emission factors developed by the Intergovernmental Panel on Climate Change (IPCC) in its Revised 1996 IPCC Guidelines for National Greenhouse Gas Inventories.

The International Energy Agency estimates include CO₂ emissions from fuel combustion in IPCC Source/Sink Category 1 A (fuel combustion activities) and those which may be reallocated to IPCC Source/Sink Category 2 (industrial processes and product use) under the Revised 1996 guidelines.^{Footnote [2]}

It should be noted that the International Energy Agency's industry disaggregation does not fully comply with the International Standard Industrial Classification of All Economic Activities, Revision 3, on which the Organisation for Economic Co-operation and Development's Inter-Country Input-Output Tablesrely on. For this reason, the Organisation for Economic Co-operation and Development developed a procedure to allocate the CO₂ emissions from the International Energy Agency to the industry structure of the Inter-Country Input-Output Tables.^{Footnote [3]}

4.2 Inter-Country Input-Output Tables

The Organisation for Economic Co-operation and Development's Inter-Country Input-Output Tables rely on data submissions from national statistical institutes. While the Organisation for Economic Co-operation and Development asks that data be provided in accordance with the International Standard Industrial Classification of All Economic Activities, Revision 3, in practice it accepts any relevant data (input-output and/or supply-use tables) at the most detailed and practicable level in any detailed format and then converts it on a harmonized basis. In the harmonizationprocess, the Organisation for Economic Co-operation and Development ensures that data tables for all countries are:

• In an industry-by-industry format;
• Expressed in basic prices;
• Aligned with the industry classifications used in the Organisation for Economic Co-operation and Development system; and
• Aligned in their treatment of concepts (most notably, the treatment of financial intermediation services indirectly measured, and differences in the treatment of other items, such as non-resident expenditures and resident expenditures abroad).

The Organisation for Economic Co-operation and Development also takes into account the fact that in some countries, some data are suppressed to preserve confidentiality and that there are also some rounding errors which need to be corrected. Finally, adjustments to country-specific data might also be required to deal with valuation differences in imports.^{Footnote [4]} In addition, the Organisation for Economic Co-operation and Development must develop estimates of trade flows between countries, using available information on import use or making assumptions when that information is not available.^{Footnote [5]}

4.3 Estimates of consumption-based carbon dioxide emissions using the Multi-Regional Input-Output approach

The Organisation for Economic Co-operation and Development estimates consumption-based CO₂ emissions by developing CO₂ emissions intensities for all outputs produced by all industries for all countries included in the database. To do this, total output for each industry (from the Inter-Country Input-Output Tables) is divided by the total emissions by industry estimated by the Organisation for Economic Co-operation and Development from the International Energy Agency's data (see Carbon dioxide emissions from fuel combustion by industry).

As a second step, symmetrical industry-by-industry input-output tables are used to develop a Leontief inverse matrix^{Footnote [6]} and the final demand matrix.^{Footnote [7]}

The final step in estimating consumption-based CO₂ emissions involves multiplying the emissions intensity matrix by the Leontief inverse and the final demand matrix. The result of this final multiplication is a matrix which represents consumption-based emissions in country [s] that are emitted in industry [i] located in country [r].^{Footnote [8]}