6 Input-output analysis

Integrated Product Policy

6.1 Introduction

From the previous chapters, it is clear that among the most significant issues in ecological economics and industrial ecology are those of interdependence and indirect effects. Both have important implications for products, as they encompass what is most often neglected – the fact that the environmental impacts of a given product are much more complex than most consumers (and also decision makers) tend to think. Although some aspects of interdependence in economics can still be enhanced, it already resembles that of natural systems, which was described by John Muir (1916): ‘When we try to pick out anything by itself, we find it hitched to everything else in the Universe.’ Interdependence among economic actors leads to a myriad of indirect effects induced by any con­sumer’s act of purchase. These effects have consequences for both the economy and the environment, especially the latter, and their indirect character means that they tend to be overlooked and neglected. Certainly, consumers very rarely take these indirect effects into consideration when making their market choices. Also, indirect effects are generally much more difficult to account for in a national accounting system. Among these indirect effects are environmental externalities, already discussed in Chapter 3.

The elementary features of input-output analysis include studying the inter­dependence of economic actors and accounting for the indirect effects (usually as induced by changes in final demand). Indeed, input-output analysis was developed by Leontief as ‘a general theory of production based on the notion of economic interdependence’ (Miernyk 1965: 5). Thus, input-output analysis has often been used by ecological economists and industrial ecologists, as reflected in the previous chapters. In the current chapter, this technique is presented in a more detailed manner, although still selectively and at an elementary level. Readers interested in a more thorough discussion should refer to its more exhaustive descriptions, such as that of Miller and Blair ( 1985). Here, particular emphasis is put on the extensions of input-output analysis used to study economy-environment interactions, both at macro- and microeconomic levels. Section 6.2 provides a rudimentary background to input-output analysis (including some very basic mathematical representations), an overview of the strengths and weaknesses of this methodology and also its traditional applica­tions. Section 6.3 offers an overview of its applications in ecological economics and industrial ecology. Section 6.4 presents recent developments in the life­cycle assessment (LCA) methodology based on combining LCA with input-output analysis. This section focuses on a hybrid approach to LCA, com­bining different approaches to perform an assessment in order to increase its accuracy. Independently, ‘hybrid’ also refers to the simultaneous use of mone­tary and physical units in an input-output analysis, as discussed in subsection 6.3.2. An additional short subsection (6.4.4) is devoted to the further potential to expand the hybrid approach to LCA ~ through qualitative and possibly also quantitative methods of systems analysis. A summary and conclusions in section 6.5 closes this chapter and, among other things, suggests potential applications of input-output analysis for the IPP. However, these are mostly indirect, meaning that input-output analysis cannot be directly invoked in the official IPP documents, but it can constitute a valuable support for the tools that are (or should be) listed therein.