Environmental Impacts of Capital Formation

The investment in capital goods is a well‐known driver of economic activity, associated resource use, and environmental impact. In national accounting, gross fixed capital formation (GFCF) constitutes a substantial share of the total final demand of goods and services, both in terms of monetary turnover and embodied resources. In this article, we study the structure of GFCF and the environmental impacts associated with it on a global scale, and link it to measures of development. We find that the share of GFCF as part of the total carbon footprint (CF) varies more across countries than GFCF as a share of gross domestic product (GDP). Countries in early phases of development generally tend to invest in resource‐intensive assets, primarily infrastructure and machinery, whereas wealthier countries invest in less resource‐intensive assets, such as computers, software, and services. By performing a structural decomposition analysis, we assess the relative importance of investment structure and input‐output multipliers for the difference in carbon intensity of capital assets, and find that the structure of investments plays a larger role for less‐developed countries than for developed countries. We find a relative decoupling of the CF of GFCF from GDP, but we can neither confirm nor rule out the possibility of an absolute decoupling.     

Coupling Input‐Output Tables with Macro‐Life Cycle Assessment to Assess Worldwide Impacts of Biofuels Transport Policies

Many countries see biofuels as a replacement to fossil fuels to mitigate climate change. Nevertheless, some concerns remain about the overall benefits of biofuels policies. More comprehensive tools seem required to evaluate indirect effects of biofuel policies. This article proposes a method to evaluate large‐scale biofuel policies that is based on life cycle assessment (LCA), environmental extensions of input‐output (I‐O) tables, and a general equilibrium model. The method enables the assessment of indirect environmental effects of biofuels policies, including land‐use changes (LUCs), in the context of economic and demographic growth. The method is illustrated with a case study involving two scenarios. The first one describes the evolution of the world economy from 2006 to 2020 under business as usual (BAU) conditions (including demographic and dietary preferences changes), and the second integrates biofuel policies in the United States and the European Union (EU). Results show that the biofuel scenario, originally designed to mitigate climate change, results in more greenhouse gas emissions when compared to the BAU scenario. This is mainly due to emissions associated with global LUCs. The case study shows that the method enables a broader consideration for environmental effects of biofuel policies than usual LCA: Global economic variations calculated by a general equilibrium economic model and LUC emissions can be evaluated. More work is needed, however, to include new biofuel production technologies and reduce the uncertainty of the method.