Domestic Fractions of Emissions in Linked Economies

Abstract

As our economies become more open and interlinked the regulatory regimes and the implementation of environmental regulations is required to adapt. Going form national economies to linked international economies the regulation of domestic emissions and natural recourses no longer reflects a control over the environmental impact of domestic consumption. This study explores the domestic fraction of environmental impacts generated in a case where two identical economies trade with each other. First a brief introduction to basic input output algebra is given. Then a reformulation of the model for a mirrored economy is derived. Through this the domestic fraction of economic activity generated and the domestic fraction of environmental impacts generated by a unit purchase of a commodity can be found. The suggested framework is then applied to the Norwegian IO tables. The results are presented and discussed in the context of regulatory policy.