A Review on Economic Input-Output Analysis in the Environmental Assessment of Electricity Generation

Abstract

This paper aims to review one of the least used, but no less important, approaches in the assessment of the environmental implications of electricity generation: the Economic Input-Output Life Cycle Assessment (EIO-LCA). This methodology is a top-down approach intertwined with the environmental satellite accounts provided by the national statistical office. Through the use of economic input-output (IO) tables and industrial sector-level environmental and energy data, the EIO-LCA analysis allows for broad impact coverage of all sectors directly and indirectly involved with electricity generation. In this study, a brief overview of this methodology and the corresponding assumptions is presented, as well as an updated review of the different applications of the EIO-LCA approach in electricity generation, suggesting a possible classification of the many studies developed in this context. The different ways of overcoming the problem of disaggregation in the electricity sector are also addressed, namely by considering different IO table formats (i.e., symmetric or rectangular tables). This is a particularly relevant feature of our review, as the way in which electricity generation is modeled can result in different calculations of the costs and benefits of environmental policies. In this context, this paper further contributes to the literature by explaining and providing examples of distinct approaches to modeling the electricity sector in IO models on a detailed level.