Input–Output Model for the Analysis of Environmental Protection Activities

Abstract

For the assessment of the economic importance of environmental protection activities, the total of all expenditure for environmental protection is often compared with the gross national product. This approach can however be satisfactoy only if it covers the expenditure for purposes of final use (e.g. fixed capital formation) which is a direct part of the expenditure-based compilation of the national product. If also expenditure belonging to intermediate consumption for the production of other goods—like current expenditure—is included, this may lead to double counting. In this article a newly developed input–output model is presented for the first time which enables us to show the extent of such double counting and to calculate a real share of environmental protection activities in the national product. Further shown are the consequences for the model of forming in the input–output table a separate service sector ‘Environmental protection activities’. The theoretical considerations are supplemented by corresponding computations for the year 1980 on the basis of the results of the environmental satellite system of national accounts in the Federal Republic of Germany.