Specification and Aggregation Errors in Environmentally Extended Input-Output Models

This article considers the specification and aggregation errors that arise from estimating embodied emissions and embodied water use with environmentally extended national input-output (IO) models, instead of with an environmentally extended international IO model. Model specification errors result from the use of domestic environmental and domestic technology coefficients to estimate emissions or resources that are embodied in international trade. For footprints, unacceptably large overestimations arise from using domestic emission coefficients, which are only partly canceled out by using domestic technology coefficients. For water use footprints both specification errors are smaller, but hardly cancel out. Sectoral aggregation errors occur when combining the 129 EXIOPOL industries to 59 EU industries and 10 broad sectors. The latter aggregation creates the largest errors. Spatial aggregation errors arise from combining 43 individual EXIOPOL countries in four broad regions and "the rest of the world". Substantial, unacceptable errors occur again, now especially in relation to water use.