Achieving carbon emission reduction by efficient re-allocation of production : A product-by-industry analysis of the technical coefficients of Sweden 2016

Abstract: The Paris Agreement has stipulated global lowering of carbon emission to reach the 1.5°C target by 2030. The Intergovernmental Panel on Climate Change has suggested several scenarios with rapid innovation and downscaling of energy usage. Against this background, this thesis analyzes the productive capacity of Sweden to reach the corresponding carbon emission target. A product-byindustry input-output-model of the economy to study different re-allocations of production is used. The effect of these re-allocations on the output as well as carbon dioxide emissions from domestic production are considered. Linear optimization is used to achieve efficient re-allocations. Two scenarios are considered: one called the “basic case”, and one called the “efficient export case”. The basic case uniformly rescales the output. The efficient export case internalizes the export and allows it to be uniformly rescaled by the optimization up to trade balance as well. The data is from 2016 as it is the latest data with the necessary information. The result for the basic case shows that the 1.5°C target in 2016 can be reached without downscaling the output. The total employment shrinks by 2%, while some sectors of the economy are significantly changed. The result of the efficient export case has a similar result while total employment shrinks by 11%. The basic case releases 2% less than the reported carbon emissions, and the efficient export case 24% less where the efficient export case downscales the gross domestic product with 13%. The dynamics of innovation, negative impacts on production, and population growth are not accounted for in these estimates. Further studies need to internalize more constraints and develop more detailed models to provide more accurate policy guidance.