Consumption-Side vs. Production-Side Environmental Performance Assessment in Multi-Sector Economies: A Comparison of Ghosh and Leontief Methods

Consumption-side regulation and production-side regulation are both important approaches to environmental policy. To effectively formulate targeted regulatory measures and support long-term sustainable development, environmental performance must first be accurately assessed. The Leontief optimization method has been proposed to assess environmental performance on the production side for multi-sector economies. However, no effective assessment tool is currently available on the consumption side. Furthermore, studies have not fully analyzed the differences in environmental performance assessment between the consumption and production sides. This means there is a lack of technical guidance for decision-makers in terms of selecting and applying appropriate methods. To address these problems, this article first proposes the Ghosh optimization method to fill the assessment tool gap on the consumption side. Second, the theoretical difference between the two methods is compared, including the theoretical basis, optimization objective, and inefficiency tracing. Finally, the tools are applied to analyze the case study of CO 2 emissions in China. This analysis demonstrates the differences in emissions reduction potential between the consumption and production sides. The results verify this study’s propositions regarding optimization objectives and inefficiency tracing. The article concludes that, to reduce carbon emissions more efficiently and achieve sustainability goals, China must focus attention on addressing the emission reduction potential from consumption.