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Balance issues in input–output analysis: A comment on physical inhomogeneity, aggregation bias, and coproduction

Guillaume Majeau-Bettez, Stefan Pauliuk, Richard Wood, Evert A. Bouman and Anders Hammer Strømman

Article (2016)

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Cite this document: Majeau-Bettez, G., Pauliuk, S., Wood, R., Bouman, E. A. & Strømman, A. H. (2016). Balance issues in input–output analysis: A comment on physical inhomogeneity, aggregation bias, and coproduction. Ecological Economics, 126, p. 188-197. doi:10.1016/j.ecolecon.2016.02.017
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Abstract

Recently, Merciai and Heijungs (2014) demonstrated that monetary input–output (IO) analysis can lead to system descriptions that do not conserve mass when the assumption of homogeneous prices is violated. They warn that this violation of basic balance laws can lead to biased estimates of environmental impacts, and they therefore recommend performing IO analysis in a physically accounted framework. We take a broader scope on this issue and present price inhomogeneity as a special case of product mix inhomogeneity. We demonstrate that even a fully physically accounted IO analysis or lifecycle assessment will violate balance laws if it suffers from inhomogeneous aggregation. The core issue is not whether a system is described using monetary or physical units, but rather whether product groups are too aggregated to allow for the concurrent respect of energy, mass, financial and elemental balances. We further analyze the link between the violation of physical balances and the introduction of biases. We find that imbalances are neither a necessary nor a sufficient condition for the presence of systematic errors in environmental pressure estimates. We suggest two ways to leverage the additional explanatory power of multi-unit inventory tables to reduce instances of imbalances and aggregation biases.

Uncontrolled Keywords

Aggregation error, Price inhomogeneity, Life cycle assessment, Physical input–output, Environmental footprinting, Industrial ecology

Open Access document in PolyPublie
Subjects: 1500 Génie de l'environnement > 1500 Génie de l'environnement
1600 Génie industriel > 1600 Génie industriel
Department: Département de génie chimique
Research Center: CIRAIG - Centre international de référence sur le cycle de vie des produits, procédés et services
Funders: Norges teknisk-naturvitenskapelige universitet, Chaire Internationale sur le Cycle de Vie
Date Deposited: 19 Jan 2017 16:16
Last Modified: 24 Oct 2018 16:12
PolyPublie URL: https://publications.polymtl.ca/2428/
Document issued by the official publisher
Journal Title: Ecological Economics (vol. 126)
Publisher: Elsevier
Official URL: https://doi.org/10.1016/j.ecolecon.2016.02.017

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