Mill’s scissors: structural change and the natural-resource inputs to labour

The environmental structural change strategy claims that by shifting our expenditures to economic sectors with lower environmental intensity, absolute resource consumption and environmental impact can be lowered. Environmental Input-Output methodologies for computing these intensities attribute no resource consumption to labour or households because these are not classified as sectors. The suggestion that service sectors entail less environmental impact, however, loses force if a unit of labour contains embodied energy, and attributing these inputs to labour drastically reduces intensity variation between sectors. Relative growth of service sectors has furthermore not been accompanied by decreased resource consumption; thus models whose intensity computations cover not only inter-firm payments but also labour earnings and household expenditures may have superior predictive power. If moreover natural-resource and labour inputs to product are incommensurable, intensity ratios themselves have perhaps only monetary, rather than real, significance.