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Industry Benchmark vs. Purchaser Price
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Author:  rob-kth [ Mon Jul 28, 2008 9:23 am ]
Post subject:  Industry Benchmark vs. Purchaser Price

Hi,

I have another question about the model:

I have used the model to find emissions from the "Audio and video equipment manufacturing" (# 334310). Actually, I used both the 1997 Industry Benchmark and the 1997 Purchaser Price models--I was curious to see the difference in emissions when you include/exclude transport, distribution and retail. And I got a "curious" result ...

The Purchase Price model returns emissions for greenhouse gases which are less than in the Industry Benchmark model.

For 1 million USD,
Industry Benchmark: CO2 = 464 MT CO2-eq.
Purchaser Price: CO2 = 419 MT CO2-eq.

I can't figure out why this would be--Couldn't there only be higher emissions when you include more lifecycle stages?

Or can the results be explained by the following: When a consumer spends 1 million USD in a sector, the result is something less than 1 million USD of production, since this money has to travel up the supply chain to producers.

If that is the case, do you happen to know of a convenient way to compare output from each of these models, i.e. estimate emissions from distribution for a given sector?

Best,
Rob

Author:  hscottm [ Mon Jul 28, 2008 10:54 pm ]
Post subject: 

Rob:

thanks for the post.

This is a fairly commonly misunderstood concept. The purchaser price model does not "add costs" it redistributes them.

Let me start by noting that for both models you input $1 million.

In the producer cost (normal used) model, that is modeled as producing exactly $1M of that item from that industry. However in the purchaser price model you are saying that someone "paid" $1 million for that product. If you look at the economic results you can at a high level get a rough idea of how that $1 million was split across the various production and (as you say) life cycle sectors. About $590k was for producing it, and some other amounts from wholesale and retail trade.

So first I note that you really only compared $1 million of AV equipment production with $590k of audio-video production (and the associated wholesale-retail and transport effects on average). Also, the difference between producer and purchaser cost GHG impacts depends alot on the relative intensity of the "production sector" with the intensities of the wholesale, retail, and transport sectors. Thus for high GHG intensive sectors, adding in the margin sectors might average-lower the net GHG emissions on a purchaser price basis. In other cases it might increase it.

Anyway no great anecdote comes to mind, but it should not be surprising that the purchaser-priced value is lower following the method above. Feel free to post more if this did not help.

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