Uncertainties in environmentally extended MRIO tables arising from assumptions made in their construction and the effect on their usefulness in climate policy

The use of environmentally extended multi-regional Input-Output (MRIO) tables has been applied to numerous applications related to accounting for emissions from consumption (Kanemoto et al., 2011a; Peters & Solli, 2010, Minx et al, 2009). However, global MRIO tables are not specifically created for this purpose and have to be approximated using individual country level input-output tables and information on bilateral global trade. Creation of an MRIO table is a significant undertaking requiring many assumptions in its construction (Inomata et al., 2006). Each assumption inherits and passes on error and uncertainty to the system. Using the freely available OECD set of IO tables and UN’s ComTrade database, this paper briefly describes the methods for constructing an MRIO and highlights where uncertainties may lie. The paper then classifies the types of assumptions that have to be made in each case and suggests a framework for investigating uncertainty in the model and a methodology for understanding implications of decisions made in model construction. The research aims to parameterise the space each input variable resides in, create input distributions for each model variable and show the differences in model outcome that result from a change in input variable. It is suggested that by gaining further insight into the sensitivities of input variables and the assumptions made in model creation, MRIO analysts can better understand which inputs and decisions, make significant differences to the way emissions are reallocated to consuming countries, which in turn could have great significance in deciding emissions reduction responsibilities. These insights should help focus attention on which data needs most attention, which decisions are significant on the overall results.

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