Policy makers and societies at large are facing increasingly pressing trade-offs between socio-economic and environmental developments. Increases in production induce growth in the use of non-renewable resources such as fossil fuels, materials, land and water. Furthermore, they generate higher levels of waste and emissions of environmental pollutants. Simultaneously, increasing global integration through international trade and technological developments creates a tension between economic growth and social cohesion. Economic growth and intensified trade seem to be coupled to an increasing inequality between countries as well as between various classes within society. These developments have a global character and any analysis of their causes and effects needs to recognize the dynamic interrelation of countries and industries.

This project aimed to develop databases, accounting frameworks and models to increase the understanding of the above-mentioned phenomena. The core of the database is a set of harmonized supply and use tables, alongside with data on international trade in goods and services. These two sets of data were integrated into sets of intercountry input-output tables. Taken together with extensive satellite accounts with environmental and socio-economic indicators, these industry-level data provided the necessary input to several types of models that can be used to evaluate policies aimed at striking a suitable balance between growth, environmental degradation and inequality across the world.

Within the scope of this project, ZEW constructed a prototype computable general equilibrium (CGE) model, i.e. a fully integrated inter-industry, international model of global trade and energy use. It is completely based on the data developed in the project. Since many CGE models typically use various data sources, a key feature of this model relianced on a single harmonized data set. The integration of industry-specific induced technological change as well as the use of a time series of input output tables were further unique characteristics of the model. Along with the modelling work, econometric techniques were applied in order to study the interrelations between economic activities and the environment as well as to examine environmental implications of structural change arising from globalization and trade liberalization.