Decomposing capital-endogenized emissions: A comprehensive accounting analysis of Korea's carbon emissions

Conventional carbon accounting methods for production-based emissions (PBE) or consumption-based emissions (CBE) treat investment as an exogenous final demand category, without accounting for the fact that capital goods are emission-intensive inputs to production. Using Korea's 2020 benchmark input–output table, we construct and compare PBE, CBE, and a capital-endogenized consumption-based measure (CBEk). We further decompose CBEk into emissions induced by household consumption, government demand, investment, and imports. The results show that endogenizing capital fundamentally reshapes the sectoral distribution of emissions. Relative to conventional CBE, emissions attributed to the Construction sector decline by 64.4%, while those for capital-using sectors increase markedly, with emissions in the Dwelling sector rising by 227.4%, ICT & Communications by 21.6%, and Service by 17.4%. Applying a novel decomposition method that fully attributes emissions to final demand, including those embodied in intermediate imports, we find that household consumption-induced emissions amount to 58.5% of total emissions under CBEk. These findings underscore the importance of endogenizing capital in national carbon accounting standards and in shifting policy attention toward demand-side mitigation strategies.