FMM Working Paper

: The role of Ecological Stock-Flow-Consistent Input-Output models in the environmental macroeconomic modelling landscape

This paper reviews the development of Ecological Stock-Flow-Consistent Input-Output models as an emerging alternative to mainstream climate-economy modelling frameworks. In light of the limitations of neoclassical approaches, which rely on restrictive behavioral and equilibrium assumptions, Ecological Stock-Flow-Consistent Input-Output models offer a coherent framework to analyze climate policies by jointly representing financial dynamics, the real economy, and ecological pressures within a stock-flow-consistent dynamic setting. After introducing the Stock-Flow-Consistent and input-output traditions separately, the paper explains how these approaches can be integrated and discusses the implications of disaggregating the production sector into interdependent industries. The existing Ecological Stock-Flow-Consistent Input-Output literature is then surveyed, with particular attention to the treatment of financial linkages, inter-industry relations, environmental extensions, and the calibration strategy. An important finding is that, while the models become more complex in both the production, financial and ecological interactions, most of the models remain theoretical or calibrated, with weak empirical foundation. The paper therefore evaluates the potential of Ecological Stock-Flow-Consistent Input-Output models as tools for climate policy analysis and argues for a shift of focus towards fully empirical implementations. Finally, it identifies key methodological and data-related challenges that must be addressed for Ecological Stock-Flow-Consistent Input-Output models to become robust and reliable components of the climate policy toolkit.

Keywords: Empirical Stock-Flow-Consistent models, Environmentally Extended Input-Output modelling, Ecological macroeconomics