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Environ. Res. Lett. 13 (2018)104013 https://doi.org/10.1088/1748-9326/aae19a
LETTER
The growing importance of scope 3 greenhouse gas emissions from
industry
Edgar G Hertwich
1,3
and Richard Wood
2
1
Center for Industrial Ecology, School of Forestry and Environmental Studies, Yale University, New Haven, CT 06511, United States of
America
2
Industrial Ecology Program, Department of Energy and Process Engineering, Norwegian University of Science and Technology (NTNU),
Trondheim, Norway
3
Author to whom any correspondence should be addressed.
E-mail: edgar.hertwiikh@yale.edu and Richard.wood@ntnu.no
Keywords: emissions responsibility, multi-regional input–output (MRIO)analysis, life-cycle assessment (LCA), embodied energy,
consumption-based accounting
Supplementary material for this article is available online
Abstract
Carbon reporting is increasingly focussing on indirect emissions that occur in the supply chain of
establishments. The GHG protocol, a corporate standard, distinguishes scope 2 (emissions associated
with electricity consumption)and scope 3 (emissions associated with other inputs), in addition to
scope 1 emissions (occurring directly at the facility or company in question). However, the magnitude
and growth trajectory of scopes 2 and 3 emissions at the economy-wide level is unknown. Here we
conduct an input–output investigation of indirect carbon dioxide (CO
2
)emissions for the global
economy organized in five sectors—energy supply, transport, industry, buildings, and agriculture and
forestry—as defined by the Intergovernmental Panel on Climate Change (IPCC). In comparison to
previous work that looks at indirect emissions of consumption, we present the first economy-wide
analysis of indirect emissions of gross production. The goal of the work is thus to capture the potential
agency different sectors have over supply chain emissions, rather allocating emissions between
production and consumption. Between 1995 and 2015, global scopes 1, 2, and 3 emissions grew by
47%, 78%, and 84%, to 32, 10, and 45 Pg CO
2
, respectively. Globally, the industry sector was most
important with scope 2 emissions of 5 Pg and scope 3 emissions of 32 Pg. For buildings, scope 3
emissions of 7 Pg were twice as high as direct emissions. Industry and buildings stood in marked
contrast to energy and transport, where direct emissions accounted for >70% of total emissions
responsibility. Most of the growth happened in developing countries. The proposed analysis scheme
could improve the integration of sector chapters in future IPCC reports.
Introduction
Direct emissions, e.g. through the combustion of fossil
fuels, are those that occur at an establishment. Indirect
emissions occur in the supply chain of the establish-
ment in question, i.e. covering all steps in the produc-
tion of the goods and services delivered to the
establishment [1]. When evaluating specificmeasures
or technologies to reduce greenhouse gas (GHG)
emissions, the most effective action should consider the
potential to address both direct or indirect emissions
[2,3]. Different expert communities have developed a
bewildering diversity of terms for indirect emissions, as
listed in table 1, which is both a testimony to their
importance and an opportunity for a more consistent
terminology to ease communication. Among corpora-
tions [4–7]and cities [8,9], the GHG Protocol is a
widely accepted standard that defines how to assess
direct emissions (scope 1), as well as emissions asso-
ciated with the supply of electricity, heat, and cooling
(scope 2)and value-chain emissions not related to the
(direct)purchase of energy (scope 3)[10,11].
In national and international climate policy mak-
ing, there is no consistent practice of taking scope 2 or
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3 emissions into account, despite the appreciation of
the importance of treating emissions embodied in
trade [12]. In the contribution of Working Group III
on climate change mitigation to the fifth assessment
report (AR5)of the Intergovernmental Panel on Cli-
mate Change (IPCC)[13], scope 3 emissions were for
the first time taken into account in the analysis of dri-
vers and trends on a national level (chapter 5). In the
accounting for carbon emissions, it is common to dis-
tinguish between production-based and consump-
tion-based emissions inventories. Production-based
inventories allocate emissions to the countries where
the emissions occur or, in the case of emissions in
international waters and airspace, to the country
where the owner of the vessel resides. Consumption-
based inventories allocate emissions occurring in the
production of goods to the countries where the final
consumer of the goods resides. In its assessment of
consumption-based emissions, which include scope 3,
the IPCC relied on newly developed multi-regional
input–output models (MRIOs)[12,14,15]. Similar
consumption-based indicators have been derived
from MRIOs for water [16,17], materials [18,19],
metals [20], land use [16,21], biodiversity threats [22]
and many other indicators, which are commonly
labelled under the popular ‘footprint’term [2]. MRIOs
represent the global value chains (GVCs)connecting
production-based emissions to consumption, yet the
intricacies of GVC are only now receiving research
attention [23,24], with a focus on economic issues
such as trade in value added (TiVA)rather than GHG
emissions.
In the sector chapters of the IPCC AR5 report
(Ch.7–11), indirect emissions from electricity produc-
tion were uniformly reported and allocated to sectors
[13]. These scope 2 emissions were prominently dis-
cussed in the buildings and transportation chapters
but received less attention in the sector chapters on
energy, industry, and agriculture, forestry and other
land use (AFOLU). Decision makers in companies and
cities understand that their mitigation and other
actions influence scope 3 emissions and perceive some
power over those emissions [25]. Policy options can be
broadened by including measures that address scope 3
emissions [26]. In its analysis of mitigation options in
the sector chapters, the IPCC-WGIII did address
scope 3 emissions only sporadically, even where trade-
offs along the life-cycle were well understood, like in
the comparison of transportation modes. The risk of
not addressing the different scopes of emissions is
potentially inefficient or misguided policy. Trade-offs
may not be sufficiently captured, e.g., between the
direct emissions from combustion engine vehicles and
the indirect emissions of electric vehicles in power sta-
tions and battery factories [27]. Mitigation in one
sector may cause emissions in another sector. At the
same time, opportunities may be overlooked, such as
Table 1. Emissions terminology clarification. Expressions akin to direct emissions (territorial, production-based, scope 1)and related to
indirect emissions (embodied, consumption-based, scope 2, scope 3, upstream, downstream, carbon footprint).
Term Explanation
Direct emissions Emissions directly associated with an activity, a process, or an entity
Territorial emissions Emissions occurring within the territory of a country. Extraterritorial emissions, such as those asso-
ciated with international aviation and shipping, are not assigned to any entity under this accounting
scheme, which is the basis of emissions reporting under the UNFCCC and its Kyoto Protocol
Production-based accounting Direct emissions of entities belonging to a country, including (usually)extraterritorial emissions
Scope 1 emissions [59]Direct emissions of an organization
Indirect emissions Emissions associated with the production of the inputs to an activity or organization
In the IPCC report, only power-plant emissions associated with the production of electricity are
accounted for
Embodied emissions Emissions associated with the production of the product in question
Consumption-based accounting Accounting scheme which assigned emissions from production to consumption, i.e. only accounting
for the direct and indirect emissions of final consumption
Carbon footprint Direct and indirect emissions associated with a specific product or consumption activity or unit. Most
literature only considers the direct and upstream indirect emissions, although life-cycle approaches
often assign end-of-life impacts to individual products or consumption activities. In organizational
reporting and the Product Environmental Footprint standards [37,38], the inclusion of downstream
emissions is optional
Scope 2 emissions Emission associated with the production of electricity and fuel, following the GHG protocol
Scope 3 emissions Emissions associated with the inputs other than electricity and those associated with the combustion of
fuel (those accounted in scopes 1 and 2), and potentially also includes emissions associated with the
use of sold products and the commuting of employees
Downstream emissions Emissions associated with the distribution, retailing, use, and waste treatment of products produced by
an organization. An optional element of scope 3 and the EC organization environmental foot-
print [11,37]
Upstream emissions In most cases, synonym to the summation of both direct and indirect emissions, i.e. those associated
with the production of inputs to an organization and the operation of the organization. In the GHG
Protocol, this is a part of scope 3 emissions
2
Environ. Res. Lett. 13 (2018)104013
reducing electricity use or creating products requiring
less energy-intensive materials [28].
If the IPCC did account more systematically for
indirect emissions, what would such an accounting
look like? How would this such an accounting be
achieved? What are the issues that a more complete
analysis of indirect emissions would address?
Scope 1 is sufficient to understand where emissions
occur. The rationale for considering scopes 2 and 3 is that
users of electricity and steel also have an opportunity to
reduce emissions associated with electricity generation
and steel production by using these inputs more effi-
ciently or replacing them with other inputs that cause
lower emissions. Conversely, they may increase those
emissions, e.g. by replacing a gas stove with an electric
one. The hesitation to use scopes 2 and 3 in emissions
accounting is that my scopes 2 and 3 emissions are the
scope 1 emissions of the power-plant and steel factory,
respectively—accounting for them as both here and
there implies a double counting. One hence must under-
stand, as the IPCC implicitly does with its consideration
of emissions from power generation, that accounting for
scopes 2 and 3 emissions is an accounting for emission
reduction opportunities. There is a shared responsibility
along the supply chain for these emissions, which pre-
vious analyses have interpreted as partial responsibility
[29–31], but which we count as both parties being
responsible.
In the corporate world, scopes 2 and 3 GHG emis-
sions are evaluated using process-based life-cycle
assessment (LCA)[11,32]. On a macro-scale, input–
output analysis (IOA)has become widely employed to
quantify emissions embodied in trade and carbon foot-
prints through the allocation of production-emissions
to consumption [12,33,34]. The approaches are struc-
turally equivalent. The most important differences are
in the scope and resolution. LCA can capture specific
production conditions and inputs, such as the choice of
a company of electricity supplier, while IOA reflects the
average of a specific industry sector in the chosen coun-
try. IOA more easily avoids double counting of emis-
sions at the macro level by allocating production-
emissions only to final demand (consumption that does
not produce any market based output),whilstLCAis
often used to quantify the quantity of emissions along
various stages of the supply chain [35,36].Scope3may
address upstream emissions related to the inputs to
production, downstream emissions related to the use of
the products produced, as well as emissions related to
commuting of employees [11]. According to the
organization environmental footprint guidelines of
the European Commission [37,38], the inclusion of
upstream emissions is mandatory while the inclusion
of downstream emissions is optional. In the context of
this paper, scope 3 refers to upstream emissions only.
The objective of this study was to provide a global
picture of scopes 1–3 emissions of sectors, using the
sector classification of the IPCC mitigation report, the
life-cycle perspective of LCA, and the macro-
economic coverage of IOA. Despite the large number
of consumption-based accounting or carbon footprint
studies, no study that we know of has employed the
LCA framing (impacts per unit of product output)to
the measure of output at the economy-wide level in
IOA because of the double counting issues [29]. The
total ‘embodied’impact of industrial production will
indeed be greater than the total emissions in the econ-
omy. This double counting reflects the reality that
there are several leverage points at which emissions
can be reduced; a coke producer can install CO
2
cap-
ture equipment, a steel producer can move to a direct-
iron reduction process not requiring coke, a construc-
tion firm can move to build wood-frame instead of
steel-frame buildings and a housing company can
refurbish an existing building instead of replacing it
with a new building. All those companies have the
power to avoid the emissions caused by the produc-
tion of coke.
Our approach traces the flow of embodied carbon
through the economy and can be used to identify
which sectors have the most influence over the full
supply chain of emissions. Gallego and Lenzen [29]
have proposed a method of shared responsibility that
can also be used to identify the influence of sectors
over the supply chain while at the same time avoiding
the double counting. Their method is one of allocating
responsibility according to a subjectively determined
distribution among consumers and producers; it does
not calculate scope 2 and upstream scope 3 emissions.
By quantifying both upstream and direct emis-
sions, our approach answers the question: what is the
scope of sectors to influence CO
2
emissions directly or
indirectly through changes in their supply chain? We
apply a Leontief demand-pull model to industrial pro-
duction, as well as final demand, using a global, MRIO
model. Consumption-based emission accounts focus
on the indirect emissions of final consumers; this
study addresses the indirect emissions of producers.
We introduce the carbon flow table to display the sec-
tor origin of scope 3 emissions and hence the inter-
connectedness of the different sectors. We find that
the industry sector dominates scope 3 emissions and
investigate whether splitting up the industry sector
would provide further insights.
Methods
The analysis was conducted with the EXIOBASE 3.4
MRIO model, describing the world economy disag-
gregated into 200 products produced and consumed
in 43 countries and six aggregate regions, covering a
time series from 1995 to 2015 [39,40]. Product-by-
product symmetric input–output tables were used.
CO
2
emissions from combustion were treated like
production factors in a Leontief demand-pull model,
as is common for carbon footprint calculations [3,41].
Other emissions were not addressed because CO
2
3
Environ. Res. Lett. 13 (2018)104013
from land use change is difficult to ascribe to products
in the input–output table and the emissions of
methane, nitrous oxide and other GHGs are more
uncertain and were not available for the most recent
years. Results for estimated GWP
100
GHG emissions
are provided in the supporting information available
online at stacks.iop.org/ERL/13/104013/mmedia.
This work used a simple endogenization of the
consumption of capital goods, which is the same in
magnitude as the augmentation approach described
by Lenzen and Treloar [42]. It assumes that each econ-
omy has one uniform capital product, the production
of which is described by the current year’s gross fixed
capital formation vector of final demand. We normal-
ized the gross fixed capital formation vector and mul-
tiplied it by the consumption of fixed capital required
for the production each product to obtain a flow
matrix of products required to replace the capital con-
sumed by production processes in the given year. Net
capital formation was calculated as the difference
between gross fixed capital formation and the con-
sumption of fixed capital by each country, and
retained in the final demand, so that the total output
vector xremained unchanged. The consumption of
fixed capital was set to zero, so that total inputs to pro-
duction also remained unchanged. See supporting
information for more details. The largest impact of the
inclusion of capital was on the carbon footprint of ser-
vices, in particular real estate services, the rental of
machinery and equipment, and public services like
education and health care.
The following derivation of Leontief multipliers
shows that multipliers applied to intermediate inputs
trace the flow of embodied carbon through the econ-
omy, counting it at each stage of production. Indirect
emissions are the CO
2
embodied in inputs from other
sectors [43]. In an input–output system, production of
products is described by the production balance in the
column of the input–output table, where inputs z
ij
are required to produce a volume x
j
of products j. The
market balance in the row of the input–output table
describes the use of product ias intermediate input to
produce products jand types of final consumption k,
åå
=+xz y.
i
i
ij
k
ik The emissions embodied in the
output of a production process are defined as the sum
of the direct emissions occurring in the process and
the emissions embodied in the intermediate inputs of
the process (figure 1).Ifm
i
is the emissions embodied
per unit input i, the direct emissions in the production
of jare f
j
, and the embodied emissions per unit output
x
j
are given by m
j
(noting that the same emissions can
be included in m
i
as m
j
), we can write the balance of
embodied carbon of each individual production pro-
cess as
å
+=" ()fmzmxj a.1
j
i
iij j j
If
="=
m
mij,
ij
the equation can be written in
matrix form as
+=ˆ()bfmZmx,1
where lower-case letters signify vectors and capital
letters matrices. The hat indicates a diagonal matrix.
Right-multiplying equation (1b)with -
ˆ
x
1and repla-
cing
=-
ˆ
s
fx 1
and
=
-
ˆ
AZx
,
1
i.e. the coefficient
matrices, we obtain
=-
-
() ()msIA.2
1
The logic inherent behind such a calculation is that
each sector in an input–output table produces a
homogenous good, which has the same cradle-to-gate
emissions whether it goes to intermediate or final
demand. For a homogenous good, the factor inputs
and their associated emissions must be the same.
The embodied flows of carbon across production
activities and to final demand are hence obtained as,
respectively,
=ˆ()aEmZ 3
Z
=ˆ()bEmy.3
y
E
Z
and E
y
are matrices or vectors with the same
dimension as Zand y, respectively, and can be read in
the same fashion as Zand y, only that they represent
the flow of embodied carbon rather than the flow of
monetary values (embodied value added).InE
Z
, a col-
umn indicates that input of embodied carbon in the
form of intermediate purchases to a sector, a row indi-
cates the destination. If E
Z
,E
Y
, and fare combined, we
get a carbon flow table displayed in table 2, which can
be read like an input–output table, only in units of car-
bon rather than monetary value.
When MRIOs are used, the carbon flow matrix
will describe both international trade and domestic
trade. The carbon flow matrix can hence also be used
to add up emissions embodied in international trade,
although this topic is not explored in this work. The
calculations presented in this work produce annual
carbon flow tables (dimension 9800×9800)account-
ing for up to 200 products produced in and sold to
each of the 49 countries or regions. To obtain the pre-
sentation in table 2,flows were aggregated across
countries and from the 200-product detail to the five
IPCC sectors, with the sector aggregation provided in
the supporting information. In addition, direct emis-
sions resulting from the fuel combustion by
Figure 1. Balance of direct and embodied emissions in a single
production process. z
ij
presents the input of products iused in
the production of j,xj the production volume of j,Fj the direct
emissions, and mi,mj the embodied emissions per unit
product in both inputs iand output j, respectively.
4
Environ. Res. Lett. 13 (2018)104013
consumers in buildings and cars were added to the
buildings and transportation sectors, respectively. End
of life emissions are associated with the consumption
of waste services, which are reported by industry/final
consumer, but not directly allocated to individual pro-
ducts. Downstream emissions can be calculated via the
Ghosh model, which could give insight into responsi-
bility down the supply chain, but provides a different
policy question to that which we take here [29].
The calculation of E
z
includes counting for emis-
sions at multiple stages along the supply chains (e.g.
emissions from steel production will be included, as
well as the embodied emissions of the use of steel in the
car). Just like one sectors’scope 1 emissions are
another sectors’scope 3 emissions, the total emissions
E
z
+E
y
are counting each unique emission multiple
times in the supply chain. Hence E
z
>E
y
(or f).As
opposed to E
y
or f,E
z
thus does not sum to the total
global CO
2
emissions, but the matrix instead shows
the level of emissions that each industry has agency
over along the full upstream supply chain. For a dis-
cussion of potential misuses of double counting in
other applications, the reader is referred to Lenzen
[36]. The greater the difference between the sum of E
z
and total emissions, the more production activities are
involved in the production of a product. The unit of
accounting here is the establishment level as defined in
the United Nations System of National Accounts. We
account output, and hence embodied emissions, at the
boundary of an establishment. Of note, if an establish-
ment was disaggregated into multiple stages, then the
level of disaggregation would impact the quantity of
double counting [36]. Hence the importance of keep-
ing to statistical quantities in the analysis.
Results
Indirect versus direct emissions per sector
In 2015, indirect (scopes 2 and 3)emissions from fossil
fuel combustion in the supply chains of all sectors
totalled 55 Pg CO
2
, up from 30 Pg in 1995, growing
83% (figure 2). In comparison, direct emissions have
grown by 47% in the same period. In the OECD, direct
emissions increased by 4% and indirect emissions by
20%; in non-OECD countries, direct emissions
doubled while indirect emissions grew by two-and-a-
half fold (figure 3). The increasing importance of
supply chain emissions indicates that intermediate
producers can have a much greater influence on
emissions than before. The industry sector as defined
by the IPCC, which includes everything from slaugh-
terhouses to tour operators, had by far the largest
indirect emissions of 37 Pg. The building sector
indirect emissions were 10 Pg, three times as high as
direct emissions. The indirect emissions for the energy
sector were about one third as large as the direct
emissions, and those of transport were two fifths of
direct emissions when driving by consumers is
included in the direct emissions. For AFOLU, indirect
emissions were almost three times as high as direct
emissions, a picture that changes dramatically when
emissions of N
2
O and CH
4
are included (see SI).
Direct CO
2
emissions increased by 47% between
1995 and 2015, scope 2 emissions increased by 78%,
indicating the increasing importance of modern
energy carriers. Scope 3 emissions increased by 84%.
The importance of scope 3 emissions increased parti-
cularly in the industry sector, but also in buildings,
transport, and energy (figure 2). The increases were
largest in the developing countries (figure 3;figure S3
for GHGs). The rise of scope 3 emissions was particu-
larly rapid in China’s industry sector, although a simi-
lar trend appeared in other countries, as the example
of Brazil in figure 3indicates. In OECD countries, the
development was different, as both energy sector and
industry’s scope 3 emissions peaked in 2007 and
declined after that. This development, while exposed
to more fluctuations, was apparent also in individual
countries such as the US and Germany (figure 3).In
1995, the ratios of scopes 3 to 1 emissions were 1.1 for
OECD countries and 1.2 for non-OECD countries. By
2015, these had grown to 1.3 and 1.5, respectively.
While the growth in importance of scope 3 emissions
was most marked in developing countries, it reflects a
structural change that happened all over the world.
Table 2. Table of embodied carbon flows through the world economy. Direct and embodied GHG emissions in an aggregated input–output
table describing the world economy in 2015, displaying the production-based accounts of combustion-related CO
2
emissions of IPCC
sectors in the last line and the consumption-based accounts of carbon footprints in the last column.
5
Environ. Res. Lett. 13 (2018)104013
Figure 2. Scopes 1–3 emissions of the five IPCC sectors over the period 1995–2015, calculated using EXIOBASE 3.
Figure 3. Scopes 1–3 emissions of OECD and non-OECD countries, and of selected countries. The figure indicates the rapid rise of
scope 3 emissions in developing countries, while industrialized countries appear to stabilize and even decrease their emissions.
6
Environ. Res. Lett. 13 (2018)104013
Aflow table of embodied carbon
The flow of embodied CO
2
through the economy is
displayed in table 2. The table is aggregated from a
more detailed table consisting of 200 products for each
of 43 economies and six aggregate regions. The table is
organized like an input–output table. The column
shows the source of (embodied)emissions, the row the
destination. The bottom row represents the direct
emissions, which are the basis of current climate
policy. The right-most column represents the con-
sumption-based accounts, which is the allocation of
direct emissions to final consumers. It has received a
fair amount of attention in recent climate policy
discussions. The sum of both is equal. Direct emissions
from fuel consumption by households have been
allocated to buildings and transport both in the direct
emissions row and the consumption column. The
table shows that for energy, the most important source
of indirect emissions were other parts of the energy
sector. An example of these indirect emissions is the
emissions from oil and gas production when oil and
gas are further refined or combusted for electricity
production. The most important destination of embo-
died emissions was industry, which absorbed half of
the emissions embodied in products of the energy
sector. A little more than one quarter went to
consumption. In the transport sector, the direct
emissions of private vehicles contributed about 2.2 Pg,
about 35% of total emissions. Industry absorbed one
quarter of the total emissions of the transport sector,
as the row indicates. Half of the transport sector’s total
emissions were associated with consumption. By far
the largest number in the table is the flow of industrial
products to the production of industrial products,
23 Pg. It appears as if industry was trading with itself,
some form of circular flow. In reality, industry
includes long supply chains, as a more disaggregated
presentation shows (table S1 in the supporting infor-
mation). For example, the emissions occurring during
iron mining are first embodied in the input of the iron
and steel industry, which is further passed on to metal
products, and from there to car production and
further to taxi services. About 35% of emissions
embodied in industry went to final consumption, and
10% went to buildings. For products of agriculture
and forestry, the most important destination is
industry, which includes food processing, followed by
final consumption.
Rapid growth of indirect emissions
When looking at total, direct plus indirect emissions,
we see that emissions from the industry sector have
increased most in the period of 1995–2015, by 75%,
followed by emissions from energy (71%)and build-
ings (61%). Direct emissions from the energy sector
have grown by 59% and the share of the energy sector
in direct emissions has increased from 41% to 45%,
but scopes 2 and 3 emissions have grown even more
rapidly. Potential reasons for this increase in the scopes
2 and 3 emissions of the energy sector are the
production of a larger fraction of more refined
products such as electricity and gasoline, or additional
effort required to extract, transport, and refine avail-
able sources, which would suggest decreasing energy
return on investment. Indeed, emissions from power
plants have doubled from 5.5 to 11 Pg, which explains
much of the growth in direct emissions from the
energy sector.
More insight by disaggregating industry
We split the industry sector into extractive industries
and material production, manufacturing, and services.
In addition, we included food processing and forestry
products (lumber)with agriculture and forestry in
AFOLU+. This reorganization was motivated by the
central role of materials in the industry chapter
identified by Allwood and Cullen [28], the overall
importance of services to the economy and their
unique importance for consumption-based accounts
identified by Suh [44], and the role of original
equipment manufacturers identified in global supply
chains [23]. The move of food processing to AFOLU is
justified as dietary change is discussed in AFOLU and
has repercussions on the entire supply chain of food.
Figure 4shows that, of the new sectors, materials
would have the highest scopes 1 and 2 emissions, while
manufacturing would have the highest scope 3 emis-
sions. Services are surprisingly important. The total
scope of emissions responsibility of each of the three
new sectors would be about the same as those of the
buildings sector and larger than transport, which,
however, has high direct emissions.
The carbon flow table (table 3)reveals that emis-
sions associated with materials production became
embodied mostly in the products of industry and
buildings. Industry produces mostly manufactured
products sold to final consumers. Materials were the
largest contributor to emissions embodied in manu-
factured products, in total slightly more important
than (embodied and direct)emissions from energy.
Services drew most evenly on all sectors for inputs and
constituted the largest component of consumption-
based emissions, higher than buildings (which include
direct emissions from heating and cooking), energy,
and manufactured products.
Manufacturing and construction can contribute to
climate change mitigation through material efficiency
measures [45]. While consumption-oriented mitiga-
tion efforts often focus on activities with high emis-
sions intensities such as mobility and housing [46],
new programmes are needed to reduce the carbon
intensity of services. A more detailed sector classifica-
tion in which the industry sector is broken up into dif-
ferent parts would invite the search for such options,
which have received surprisingly little attention
to date.
7
Environ. Res. Lett. 13 (2018)104013
Discussion
The implications of indirect emissions for the IPCC
assessment
The present analysis shows that indirect emissions are
substantial and growing. One may argue that indirect
emissions do not matter. In the end, direct emissions
need to be reduced; my indirect emissions are some-
body else’s direct emissions. However, as the treat-
ment of scope 2 emissions by the IPCC illustrates,
addressing such emissions systematically reveals a
multitude of opportunities both to save energy and
Figure 4. An alternative sector classification, in which materials and services are split off the industry sector to form their own sectors
and food and forestry products are shifted to an expanded agriculture, forestry and other land use (AFOLU+)sector would result in a
more even scope for CO
2
mitigation across sectors.
Table 3. Embodied carbon flow table through the world economy in 2015 following a more detailed sector classification, in which the
industry sector was broken up into materials, manufacturing (industry), and services, and the AFOLU+sector includes the processing of
food and forestry products.
8
Environ. Res. Lett. 13 (2018)104013
avoids problem-shifting. The same logic applies to
scope 3 emissions.
•For transportation, the emissions associated with
producing vehicles and roads are of comparable
magnitude as those associated with producing gaso-
line or diesel [47]and battery manufacturing would
impose substantial emission costs on a transition to
electric vehicles [27]. Investigations of high-speed
rail, for example, revealed significant impacts
related to construction [48]. As distribution of
impacts varies among technologies, it is important
to take all impacts into account when considering
alternatives. Ignoring scope 3 impacts might lead to
the promotion of technologies that do not yield the
expected emission reductions.
•The building chapter [49]was very much focused
on the building as an artefact, not following any
economic logic or sector classification. In this paper,
the construction sector was included under build-
ings in addition to real estate services, which
includes housing. Such an organization would be
more logical. For buildings and construction, scope
3 emissions were larger than scope 2 emissions and
may be harder to avoid (tables 2and 3); decarboniz-
ing electricity production will eliminate emissions
associated with electricity consumption but do little
to remove emissions from concrete and steel
production or the operation of heavy equipment
during the construction process. While the build-
ings chapter of IPCC-WGIII reports was in the lead
in addressing scope 2 emissions, it has paid little
attention to scope 3 emissions [49].
•A review of the industry chapter indicates that it has
a balanced analysis of the wide scope of industries,
from basic extractive industries through manufac-
turing to services, but places its emphasis on the
emissions-intensive materials and chemicals sectors
[50]. In the summary reports, however, emissions
are aggregated and the effects of important struc-
tural changes within industry are overlooked. In
particular, little heed is played to services, which
contribute significantly to the carbon footprints of
consumption. An alternative organization might
capture three aspects, extractive industries and
material production, manufacturing, and services,
in separate chapters.
•In the energy chapter, scope 3 emissions associated
with the development of energy infrastructure were
addressed in AR5 [51]for electricity generation
sources and are being systematized now [52].
Similar considerations for other pieces of the energy
infrastructure are not likely to reveal large scope 3
emissions, as our assessment of the whole sector
shows.
•Consumption and lifestyle aspects of climate change
mitigation were most systematically addressed in
the buildings chapter, although half of the carbon
footprint of final demand is associated with the
consumption of products and services produced by
industry. The AFOLU chapter addresses dietary
change as a mitigation strategy but does not address
the analysis of food processing or transport. While
such overlaps are inevitable due to the many
interactions across sectors, the patchy treatment of
final demand is not [53]. The IPCC might choose to
have a dedicated chapter on final demand focusing
on structural and behavioural aspects, or it could
systematically address final demand within each of
the sector chapters. Tracing indirect emissions with
a global input–output model as presented here will
provide a mechanism by which to related emissions
and mitigation actions in various sectors to carbon
footprints, and to assess the mitigation impact of
consumption and lifestyle changes.
We suggest that the IPCC could use the type of
analysis presented here to systematically address the
interconnections among sector chapters and to iden-
tify the potential overlap and synergies of various miti-
gation strategies, especially those from the demand
side. The analysis could be expanded to address the
composition of sectors in greater detail, as represented
by the national economic accounts. At the outset of the
work of the IPCC, there was insufficient information
at the global level to effectively use economic accounts,
but with the emergence of global multi-regional
input–output tables, there are now research tools
available to offer the required information. This
approach would also allow the IPCC to trace changes
in the connections among sectors across time.
Manufacturing and construction can contribute to
climate change mitigation through material efficiency
measures [45]. While consumption-oriented mitiga-
tion efforts often focus on activities with high emis-
sions intensities such as mobility and housing [46],
new programmes are needed to reduce the carbon
intensity of services. A more detailed sector classifica-
tion in which the industry sector is broken up into dif-
ferent parts would invite the search for such options,
which have received surprisingly little attention
to date.
Emissions embodied in capital goods
Scope 3 emissions include those associated with
manufactured capital utilized in the production of
energy and products, such as coal mines, vehicles,
roads and buildings. Gross fixed capital formation
accounted for 25% of the consumption-based emis-
sions in 2015, comparable to the direct emissions from
industry. The emissions for manufacturing the capital
equipment utilized today occurred in the past. In
principle, a dynamic modelling approach of the capital
9
Environ. Res. Lett. 13 (2018)104013
stock [54]and a level of detail in which five to ten
different capital goods are distinguished [55]could
offer a good assessment of these historical carbon
emissions. In practice, the national economic accounts
of most countries do not publish such detailed
information on the type of capital goods utilized by
different sectors. In this work, we have assumed that
all sectors use the average capital good produced in the
same year, in line with other assessments [56].
Construction, machinery, and vehicles account for
two thirds of capital expenditures and their carbon
intensity varies little, so that the error introduced
through this simplification is not so large [55]. A better
analysis of the emissions embodied in different types
of capital goods could provide policy makers with a
better understanding of the dynamics of emissions
related to capital formation and could help identify
development pathways for developing countries that
are less polluting than the standard model of indus-
trialization. Tracing development dynamics through
an explicit representation of the capital stock would
require national statistical offices to provide more
detailed capital accounts and would benefit if the
capital is accounted for in physical units (number, kg
etc)as well as the more common monetized
valuations.
Useful for directing further analysis
The use of MRIO tables for the quantification of
emissions embodied in products traded internationally
[1,57]and the carbon footprints of final demand is well
established [58]and accepted by the IPCC [13].Inthis
manuscript, we extended the application of MRIO
models to quantify indirect emissions of all sectors
represented by sector chapters in the IPCC report. With
this approach, we could identify important intercon-
nections between different sectors, particularly when
dividing the industry sector in materials, manufactur-
ing, and services. We could show that the contribution
of materials and manufacturing to the buildings sector
was surprisingly important on the global level. Materials
contribute as much to manufacturing as energy. The
carbon flow table, in particular, provides a new
perspective for sectoral carbon accounting and a handy
way of gaining an overview at an intermediate level of
detail, as soon as one learns how to read it. It provides
new insights into the scope of sectors to reduce
emissions and may affect our judgement of the merit of
mitigation actions. A scopes 2 and 3 analysis of
particular economic sectors also chimes with how
companies and cities approach the development of their
mitigation strategies. The IPCC has so far struggled with
properly considering such bottom-up mitigation activ-
ities in its assessment of climate change mitigation. The
approach presented in this work allows analysist to use
at least the same concepts as companies, which would
be a starting point for better considering ongoing
mitigation activities.
Data availability
The EXIOBASE MRIO data used to produce the
results is from http://exiobase.eu/. The code to
reproduce the results is posted on https://github.
com/Hertwich/Embodied_C_IPCC_sectors/.
ORCID iDs
Edgar G Hertwich https://orcid.org/0000-0002-
4934-3421
Richard Wood https://orcid.org/0000-0002-
7906-3324
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