ENERGY DEPLETION, CARBON
DAMAGE AND GENUINE
PRODUCTIVITY OF CHINA’S
PROVINCES: A MRIO ACCOUNTING
Yuning Gao
School of Public Policy and
Management
Tsinghua University
2017.6.21
1. EXPANDING THE MEASURE OF WEALTH
System of Integrated Environmental and Economic
Accounting (SEEA) by UN (1993,2003) was
officially adopted by UNSTA(2012) as
appended Account to SNA
Social Matrix Including Resources and Environment
of Atkinson, Hamilton and Pearce et.al. (1997)
was developed as Genuine Domestic Saving
(GDS) by World Bank (1997, 2003, 2006, 2011)
Production Factors
Production
Factors
Institutions Saving RoW Resources Environment Totals
C
I
Total disposition of
goods and services
X
Net disposition of
goods and services
NDP
Institutions
NDP
NRP
NEP
Saving
Sg
δK
Rest of World
M
σ.e
Gross Resource Product
n.g
Environment
Total
supply of
humanmade
goods and
services
Net
supply
of
humanmade
goods
and
services
PB.B
σ.d
Supply
of
welfare
(MEW)
Total
suppl
y of
savin
g
Tot. disposition of
saving (investment
finance)
Total disposition to
rest of world
(X-M)
Resources
Totals
nR
Disposition of
welfare
Gross Environmental
Product
Total
Total
sup
supply of
ply
resources
to
rest
of
worl
d
Total
supply of
environme
ntal
benefits
BASIC CONCEPTS
Genuine Domestic Saving
+m
Traditional Net Saving = GNP-C-δK
Energy Depletions = Marginal Energy Rental Rate *
Net Energy Extraction n(R-g)
(Carbon) Emission Costs = Marginal Social Cost * Net
(Carbon) Emission
σ(e-d)
Natural Capital Lost
MARGINAL RENTAL RATE
Marginal Energy Rental Rate equals the present
value of stocks of the rent (production volume * [(unit
price-unit cost)/unit price]) of main energy sources
We chose to cap exhaustion time at 25 years for all
the energy sources and countries
Marginal Social Cost of carbon dioxide damage is
estimated to be $20 per ton of carbon (in 1995 U.S.
dollars)
CHINA’S DEPLETIONS AND DAMAGE
(NATURAL CAPITAL LOST)
25
carbon dioxide damage (% of GDP)
20
energy depletion (% of GDP)
15
10
5
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
0
CHINA’S GENUINE NET SAVING RATE
60
50
40
30
20
10
0
-10
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Gross Savings
Net National Savings
Adjust net savings
2. DIRECT AND INDIRECT DECOMPOSITION
OF NATURAL CAPITAL LOST
Energy Depletion:
E
DE E
E Ei
D  ni E  nE  E Ei  D E
E
E
E
i
E
i
E
i
CO2 Damage for all sectors
(ni  n j  n)
 CO2 Emission= Consumption of Fossil Fuel × Carbon
Emission Factor (0.67) × Fraction of Carbon Oxidized
 For Non-metal Mineral Products only: Production of
Cement × Processing Emission Factor (0.367)
2012
2010
2008
2006
2004
2002
2000
40
1998
50
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
PROVINCIAL DEPLETIONS AND DAMAGE
60
Max
AVE
Min
Max (ex. Shanxi)
30
20
10
0
INDIRECT RELATION
Main issue: productivity analysis needs time series
inter-regional IO table
Multi Regional IO table 1997, 2002, 2007 (8
regions, 17 sectors) and 2000, 2005, 2010
extended table from Meng (2014)
Interpolated to time series multi regional IO table
by RAS methods
THE INDIRECT DECOMPOSITION OF
NATURAL CAPITAL LOST
The decomposition of natural capital lost D
happens first between the blocks of intermediate
inputs and final use and then through the
intermediate input matrix
𝑖
𝐷out = lim
𝑖→∞
𝐴𝑇 𝑖 𝐷 +
𝐶 𝐴𝑇
𝑙−1 𝐷
= 𝐶 𝐼 − 𝐴𝑇
𝑙=1
Hereby C is a diagonal matrix of ratio of final
use share
𝐶 = 𝑑𝑖𝑎𝑔(1 −
𝑎𝑗𝑖 )
𝑖
−1
𝐷
2013
2012
0
2011
0
2010
5
2009
5
2008
10
2007
10
2006
15
2005
15
2004
20
2003
20
2002
25
2001
Direct Decomposed
2000
25
1999
30
1998
30
1997
35
1996
35
1995
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
PROVINTIAL LEVEL NATURAL CAPITAL LOSS
Indirect Decomposed
INTER-PROVINCIAL TRANSFER OF
NATURAL CAPITAL LOSS (INDIRECT)
1000
800
Other "Importers"
600
Shaanxi
400
Guangdong
Shandong
200
Zhejiang
0
Other "Exporters"
-200
Shanxi
-400
Hebei
-600
-800
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
-1000
3. RELATED DEFINITIONS
Genuine Value Added (Output)
Genuine Capital Formation
+m
Genuine Capital Stock (Input)
Min (ex. Shanxi)
60
80
Max
AVE
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
80
70
60
60
50
40
40
20
30
Max
10
Mean
Min
90
90
80
80
70
70
60
60
50
50
40
Direct
Max
AVE
Min
30
20
30
10
20
0
Indirect
Genuine
Regional
Capital
Stock
Max
Mean
Min
2012
2010
2008
2006
2004
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
100
1978
0
-20
40
Min
20
0
100
Mean
Indirect
Genuine
Regional
Capital
Formation
90
Direct
Min
100
Max
2002
100
1984
50
1982
50
1980
55
1978
55
2012
65
2010
Min
2008
70
2006
AVE
2004
60
75
2002
Direct
65
Max
2000
70
1998
75
1996
80
1994
80
1992
85
1990
85
Indirect
Genuine
Regional
Value
Added
1988
90
1986
90
1984
95
1982
95
1980
100
1978
100
4. PRODUCTIVITY ANALYSIS




Divisia Productivity Index A  Y   L  (1   ) K
The adjustment on the operating surplus will also
change the labor output elasticity to
′
𝛼 =
𝛼
1−𝜌
𝛼 is the original labor output elasticity
𝜌 is the proportion of resource depletion and
environment damage in original value added
DETERMINANTS OF PRODUCTIVITY GAP
Which means the productivity gap has the
opposite sign with the first order difference of
Natural Capital Loss (θ)
AVERAGE TRADITIONAL / GENUINE
PRODUCTIVITY DIFFERENCE
Gap (rhs)
Level (lhs)
12
80
Traditional
10
70
Genuine (Direct)
Genuine (Indirect)
8
60
2013
2011
2009
2007
2005
-10
2003
-6
2001
0
1999
-4
1997
10
1995
-2
1993
20
1991
0
1989
30
1987
2
1985
40
1983
4
1981
50
1979
6
PROVINCIAL TFP GROWTH (1995-2013)
Genuine TFP
7.00
Guangxi
Genuine (Direct)
6.00
Genuine (Indirect)
Genuine TFP
1995-2003
5.00
6.00
4.00
Genuine (Direct)
3.00
Heilongjiang
Genuine (Indirect)
5.00
Shanxi
2.00
1.00
4.00
0.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
-1.00
-2.00
3.00
Tradisional TFP
Genuine TFP
6.00
2.00
5.00
Guangxi
4.00
1.00
2003-2013
3.00
0.00
2.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Shanxi
Tradisional TFP
1.00
Heilongjiang
0.00
-2.00
-1.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Genuine (Direct)
Genuine (Indirect)
Tradisional TFP
CONCLUSIONS
The natural resource depletion and carbon damage
cost vary between 5 to 20 per cent of China’s
provincial and up to 30 per cent (by 2007) of fixed
capital stock on average
Transfer of national capital lost between resource
supplier and advanced costal provinces is quite
obvious and quite consistent under two different multi
regional IO method
They also lead to a decline slowdown of the
productivity growth up to 10 per cent under direct
approach in early 1980s while under indirect
approach recently.