Sub-system input-output analysis of international and inter-industry leakage of emissions induced by household consumption in the United States of America

Abstract

The literature highlights the significant greenhouse gas (GHG) emissions by households in the United States of America (USA) and consumption-induced carbon leakage from the USA to other countries over the last few decades. However, there is a lack of examination of the evolution of emissions induced by the demand of US households from both inter-industry and international trade perspectives. This paper extends the standard sub-system input-output decomposition method to fill this gap. The standard method decomposes industry-level emissions into direct, internal, feedback, and spillover effects as structured in the input-output database. We propose decomposing the spillover and feedback effects additively into several sub-components, capturing the effects that are attached to USA imports from its trading partners. Using data from EORA-26, we provide a detailed analysis of how these effects have changed from 1990 to 2021 at the aggregate and industry levels. Empirical analysis provide insights into the main factors that drive inter-industry emission and international emission leakages from the USA to its main trading partners.