Towards a low carbon ASEAN: an environmentally extended MRIO optimization model

Background

Economic growth is dependent on economic activity, which often translates to higher levels of carbon emissions. With the emergence of technologies that promote sustainable production, governments are working towards achieving their target economic growth while minimizing environmental emissions to meet their commitments to the international community. The IPCC reports that economic activities associated with electricity and heat production contributed most to GHG emissions and it led to the steady increase in global average temperatures. Currently, more than 90% of the total GHG emissions of the ASEAN region is attributable to Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. These regions are expected to be greatly affected with climate change. This work analyzes how ASEAN nations can achieve carbon reduction targets while aspiring for economic growth rates in consideration of interdependencies between nations. We thus develop a multi-regional input–output model which can either minimize collective or individual carbon emissions. A high-level eight-sector economy is used for analyzing different economic strategies.

Results

This model shows that minimizing collective carbon emissions can still yield economic growth. Countries can focus on developing sectors that have potentials for growth and lower carbon intensity as new technologies become available. In the case study examined, results indicate that the services sector, agriculture, and food manufacturing sector have higher potential for economic growth under carbon reduction emission constraints. In addition, the simultaneous implementation of multiple carbon emission reduction strategies provides the largest reduction in regional carbon emissions.

Conclusions

This model provides a more holistic view of how the generation of carbon emissions are influenced by the interdependence of nations. The emissions reduction achieved by each country varied depending on the state of technology and the level of economic development in the different regions. Though the presented case focused on the ASEAN region, the model framework can be used for the analysis of other multi-regional systems at various levels of resolution if data is available. Insights obtained from the model results can be used to help nations identify more appropriate and achievable carbon reduction targets and to develop coordinated and more customized policies to target priority sectors in a country. This model is currently limited by the assumption of fixed technical coefficients in the exchange and interdependence of different regions. Future work can investigate modelling flexible multi-regional trade where regions have the option of substituting goods and products in its import or export structure. Other strategies for reducing carbon emission intensity can also be explored, such as modelling transport mode choices, or establishing sectors for waste management. Hybrid models which integrate the multi-regional input–output linear program model with data envelopment analysis can also be developed.