EIPOT Final Project Report - Stockholm Environment Institute

ERA-NET SKEP Project EIPOT (www.eipot.eu)
“Development of a methodology for the assessment of global environmental impacts of traded goods and services”
• Hybrid LCA is already a combination of LCA and SRIO, but is more laborious than the individual
methods. However, combining it with MRIO modelling would be a useful extension.
Dynamic models, which are often based on one of the core methods (IO, LCA or hybrid), are a
valuable extension to convert into an early warning and forecasting tool. Econometric models explore
changes in environmental pressures, for example from policy measures like trade tariffs or regulation.
Since most dynamic and econometric approaches are covered by the static core methods (or the data
they use), these approaches are not considered explicitly in the remaining chapters.
The most promising way forward appears to combine various methods and synthesise best-suited
elements from different existing approaches.
4 Recommendations on Methodology
4.1 General conceptual design
A variety of approaches and indicators have been developed to assess the environmental impacts of
products and resource use. Among them are life cycle assessment of products (process LCA),
economy-wide material flow analysis (MFA), environmentally extended input-output analysis (EE-IOA)
and ecological footprint (EF) analysis. Following the results of our RACER analysis, the most
promising way forward seems to be a combination of available or emerging methods. In contrast, the
parallel use of, say, three detached methods does not appear to be effective or easily practicable.
EIPOT focussed on trade flows between different economies and production sectors within them, not
on specific products. This is a crucial decision, as obviously macro- (and meso-) economic questions
can be resolved best with methodologies different to those suited for micro-economic problems.
Life cycle assessment (LCA) originating from engineering and input-output analysis (IOA) originating
from economics have several conceptual differences. They differ in their data inputs and guidelines for
collecting these data (ISO standards versus System of National Accounts, SNA). Since both methods
consider entire production chains, they should in theory generate the same outcomes in analysing the
same question. However, given their conceptual differences their applicability is not similar. The
environmental impact of one traded product, for instance, is probably quantified best using an LCA
approach. LCA theoretically might be applicable to trade flows, however in practice it appears to be
unpractical. Apart from unsatisfactory data availability in the foreseeable future, the number of traded
products is enormous, and individual supply chains are too complex. On the other hand, IOA is more
applicable at the level of aggregated trade flows on the meso and macro level.
Since EIPOT’s main aim is to recommend a methodology to quantify and assess environmental
impacts of trade flows, rather than individual products, a medium level of aggregation seems
appropriate for this purpose. A resolution of around 100 to 200 sectors is a desirable and practical
compromise that still allows the distinction of high-impact sectors whilst keeping data and
computational requirements at a manageable level. Further details are discussed below.
We therefore regard EE-IOA with the SEEA (System of Economic and Environmental Accounts)
framework as an ideal basis for an EIPOT methodology. The RACER analysis proved that EE-IOA is a
generally accepted, credible and robust methodology. EE-IOA is commonly used to derive the indirect
environmental pressures associated with the final use of products and services in a given economy.
EE-IOA can be used to help to sum up all environmental pressures arising along the production chain
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