Method for endogenizing capital in the United States Environmentally‐Extended Input‐Output model

T. Reed Miller, Peter Berrill, Paul Wolfram, Ranran Wang, Yookyung Kim, Xinzhu Zheng and Edgar G. Hertwich

Journal of Industrial Ecology, 2019, vol. 23, issue 6, 1410-1424

Abstract: Each year businesses, governments, and homeowners in the United States invest around one fifth of gross domestic product into the creation of capital assets such as buildings, machinery, and software to enable production and consumption. Use of capital is typically included to some extent in environmental life cycle assessments of goods and services but is not incorporated into most environmentally extended input‐output (EEIO) models, including the US Environmental Protection Agency's USEEIO. Capital assets are typically created in years prior to their use, so a challenge lies in distributing the impacts of their creation over time. In this work, a highly detailed capital flow matrix approach is followed to distribute the use of fixed capital assets to consuming industries. Data from the US Bureau of Economic Analysis's Fixed Asset Accounts is merged with its Industry Accounts data by the creation of concordance tables. Public highways and streets are partially reallocated to industries operating vehicles. The resulting capital use matrix is later combined into a modified USEEIO. “Housing” is found to be the largest consumer of fixed assets, followed by general government, fossil fuel extraction, and financial industries involved in leasing. Construction, vehicles, and machinery are mostly used by industries in the form of fixed assets. The types of fixed assets used by industries are consistent with expectations: housing is dominated by structures, transport by equipment, and information industries by intellectual property products.

Date: 2019
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