Input-output analysis (IOA) is the analysis of product relationships, specifically the product inputs and outputs, between all activities of an economy. This analytical framework systematically examines how different sectors and activities within an economic system are interconnected through their production and consumption patterns. IOA is usually recorded in monetary units, allowing for standardisation and comparison across diverse economic activities.
The foundations of input-output analysis were developed by economist Wassily Leontief in the 1930s, for which he received the Nobel Prize in Economics. The method creates a comprehensive picture of an economy by documenting how the output of one sector becomes the input to another, revealing the interdependencies that exist throughout the economic system.
In the context of Life Cycle Assessment, input-output analysis provides a powerful tool for understanding the environmental implications of economic activities. Environmentally extended input-output (EEIO) analysis combines traditional economic input-output tables with environmental data, such as emissions, resource consumption, and waste generation. This extension allows practitioners to trace environmental impacts through complex supply chains and assess the full life cycle implications of products and services.
Input-output tables typically record transactions in monetary values, which enables aggregation across different product types and facilitates economy-wide analysis. These tables form the basis for creating supply-use tables and direct requirements tables, which are fundamental to both economic analysis and LCA system modelling. The monetary recording also allows for consistent integration with national accounting frameworks and economic statistics.
Whilst input-output analysis offers comprehensive coverage of economic activities, it operates at a more aggregated level than process-based LCA. This aggregation means that sector-level averages are used, which may not capture the specific characteristics of individual production processes. However, this broad coverage makes IOA particularly valuable for capturing indirect effects throughout supply chains that might be missed by process-based approaches with truncated system boundaries.
