these categories may be converted into a single thermodynamic unit of solar ... determine the mass of materials flowing from ecosystems to the economy and ... ecological goods and services to economic sectors via input-output analysis ...... sector per unit of economic activity (b) Total ICEC throughputs with impact and total.
Accounting for Ecosystem Contribution to Economic Sectors by Thermodynamic Input-Output Analysis, Part I. Approach Nandan U. Ukidwe and Bhavik R. Bakshi Department of Chemical Engineering, The Ohio State University, Columbus, OH 43210 Abstract: Ecosystems are vital to any human activity because they constitute the basic planetary support systems. Their deterioration threatens the sustainability of all industrial activity and erodes a nation’s productive capital base. A necessary step towards preserving ecosystems is to estimate their contribution to economic activity. Most contemporary economic, thermodynamic and life cycle assessment methods fail in this regard because they take ecosystems for granted. The concept of Ecological Cumulative Exergy Consumption (ECEC) does consider ecological products and services by expanding traditional or industrial cumulative exergy consumption (ICEC) analysis to account for exergy consumed in the ecological processes necessary for the relevant industrial processes. This series of two papers develops the methodology and application of ECEC analysis to an economy. This paper presents the methodology for including natural capital, ecosystem services, human resources and impact of emissions. Inputs from all these categories may be converted into a single thermodynamic unit of solar equivalent joule. Subsequently these inputs are allocated through the economic system using economic inputoutput data. This enables evaluation of direct as well as indirect contribution from ecosystems to economic sectors. Part I of this series explains the methodology with the help of a small illustrative example, while Part II applies the methodology to the US economy.
1. Introduction Ecological products and services are indispensable for any industrial, economic or social activity on earth. Examples of ecological products include coal, timber, water and atmospheric oxygen, while ecological services include rain, pollination, carbon sequestration and pollution abatement (1,2,3,4) Despite their obvious importance, traditional methods in engineering, economics and other disciplines have tended to ignore the role of ecosystems by considering them to be an “infinite sink” or “free”. As a result, business and policy decisions are usually made with a flawed accounting system that ignores the basic life support system for all activity. The focus of such an approach tends to be on short-term gain, while longer-term sustainability issues get ignored. Such myopic and ecologically unconscious decision-making is continuing to cause significant and alarming deterioration of global ecosystem products and services (5,6,7). The importance of accounting for the contribution of ecosystems to economic activity is being slowly recognized in both, academia and industry (8). Techniques for full or total cost accounting to include environmental and social aspects along with economic aspects are being developed and used in industry. Techniques such as Life Cycle Assessment (LCA) are being standardized and adopted by many corporations to obtain more holistic and complete information about the impact of their products and processes on the environment. However, LCA focuses mostly on the emissions from industrial processes and their impact and on consumption of nonrenewable resources. It does not account for the contribution of ecosystems to industrial activity. A variety of techniques have attempted to quantify the contribution of ecosystems to economic activity. All techniques face common challenges of combining information 1
represented in a diverse set of units, uncertain knowledge and lack of adequate data about ecosystems. These techniques may be broadly categorized as preference-based and biophysical methods. Preference based methods assign a monetary value to ecosystem goods and services by relying on human valuation. A pioneering study by Costanza et al (3) estimated the value of ecosystem services to be almost twice that of the global gross economic product. A more recent study indicates that saving the existing unspoiled ecosystems is at least 100 times more valuable than developing them for economic activity (9). Many techniques have been developed for valuation of environmental goods and services (10). Industry groups have also collaborated to develop preference-based methods for Total Cost Assessment (11). A significant advantage of these methods is that using a single unit permits ready comparison across economic and ecological contributions. However, valuation methods are often controversial and rely on knowledge about the role of each ecological products and services. Such information, along with satisfaction of scientific laws may be provided by biophysical methods. Biophysical methods rely on biological and physical principles to account for the role of ecosystems. They may be broadly classified as follows. · Mass based methods have been popular to determine the physical basis of economic activity and its interaction with ecosystems. Material flow studies have been conducted for many countries including Japan, Netherlands, U.S., Germany and Austria (12,13,14). These studies determine the mass of materials flowing from ecosystems to the economy and the emissions from the economy. Indirect or hidden flows are also quantified, and metrics have been developed for comparison across various countries. Most of these studies are at the level of the entire economy, and disaggregation to more detailed levels is being developed. Since mass does not capture many other properties of materials, such as their energetic contribution and impact, these MFA studies are of limited use by themselves. However, they can provide a good database for developing other more comprehensive methods. Furthermore, existing methods are quite limited in their incorporation of ecosystem services which cannot be readily captured in terms of mass flow. · Energy based methods determine the flow of energy through various sectors of the economy. These methods were developed under names such as net energy analysis and full fuel cycle analysis and were popular during the 1970s and 80s (15,16,17,). They consider the energy content of industrial inputs and outputs including exchanges between economic sectors and those from ecosystems to the economy. The framework of input-output analysis is used for mathematically sound analysis of energy flow in ecological and economic systems (18). Like mass, energy also does not capture many aspects such as the environmental impact of emissions and ignores the second law of thermodynamics. · Exergy based methods satisfy the first and second law, and have been popular for assessing the thermodynamic efficiency of industrial processes (19) and to analyze the behavior of ecosystems (20). Exergy is the energy available to do useful work. It can capture various quality aspects of streams as indicated by their mass, energy, concentration, velocity and location. Thus, exergy can characterize both mass and energy streams, and is the only truly limiting resource on this planet (21,22,23). Extensions of exergy analysis such as Industrial Cumulative Exergy Consumption (ICEC) analysis (19) and Exergetic LCA (24) consider the exergy consumed in all processes that transform natural resources into economic products.
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However, exergy based methods ignore the contribution of ecosystems, and the impact of emissions. Furthermore, exergy analysis at the level of economic sectors is not yet available. · Emergy based methods developed by systems ecologists have also been used to analyze ecological and economic systems. Emergy is the available energy used directly or indirectly to make any product or service, and is measured in solar equivalent joules (sej) (4). The key strength of emergy analysis is that it does account for the contribution of ecological products and processes. However, emergy analysis faces quantitative and algebraic challenges and its broad claims about ecological and economic systems are quite controversial (25,26). Recently, the concept of cumulative exergy consumption (CEC) has been expanded to include ecosystems (26). The resulting Ecological Cumulative Exergy Consumption (ECEC) is shown to be equivalent to emergy under identical analysis boundary, allocation method and approach for combining global exergy inputs. Under these conditions, transformities derived in emergy analysis are equivalent to the reciprocal of the cumulative degree of perfection (CDP) in CEC analysis. The rigorous methodology for computing ECEC relies on only those elements of emergy analysis that quantify the contribution of ecological goods and services. Thus, ECEC combines the ability of emergy analysis to account for ecological products and services with the scientific rigor of exergy analysis. It develops a rigorous algorithm to compute ECEC of any network without relying on the controversial aspects of emergy analysis and also provides the foundation for this work. This series of papers presents a thermodynamic approach for including the contribution of ecological goods and services to economic sectors via input-output analysis and its application to the US economy. This first part focuses on the approach. It uses ECEC analysis to quantify the extent of the ecological contribution. The cumulative exergy consumption of ecosystem inputs is determined via transformity or efficiency values available in the systems ecology literature and from existing mass and energy flow analyses. As a result, all inputs are represented in consistent thermodynamic units of solar equivalent (or emergy) joules (sej). Since detailed knowledge about the structure of the ecological network and its products is not available, the exergy consumed in ecosystems is not partitioned between various ecological products and services. In contrast, detailed information about the economic network and its products is readily available. Consequently, the cumulative exergy consumed by economic sectors is partitioned between multiple products based on monetary, mass, exergy or other units. Not partitioning the cumulative exergy between ecological goods and services requires techniques to avoid double counting. Following ECEC analysis (26), the approach of this paper avoids double counting by performing the network computations separately for each ecological input, followed by taking the maximum value at each network edge for non-additive inputs. The proposed approach also accounts for the ecosystem inputs required to dissipate emissions and to absorb their impact. Ecosystem services required to dissipate or dilute emissions are determined via fate factors and transformities of the relevant services. Furthermore, the impact of emissions can be quantified by converting the result of an end-point impact assessment such as eco-indicator 99 (27) into the exergy lost in absorbing the impact. This conversion permits comparison of all inputs, outputs and impact in a consistent set of thermodynamic units. However, such a representation of ecological inputs and impact of emissions in terms of a single unit is not essential for the proposed approach. It may be used only if obtaining a single set of units is desirable. Input-output analysis has been used for analyzing the environmental aspects of economic systems starting with the early ideas of Leontief (28). Input-output analysis was popular for
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energy analysis (16,17), but this approach only considered the first law. Recently, Hannon (18) presented an input-output framework for joint analysis of ecological and economic systems. However, this work does not rely on exergy analysis and does not account for emissions and their impact. Economic input-output LCA (31) is similar to the proposed approach in its use of the toxic release inventory data to determine the emissions from each sector. However, unlike previous approaches, the work described in this article also accounts for ecological inputs, and uses end-point methods for impact assessment, with exergy as the common thermodynamic unit. The rest of the paper continues with a brief introduction to Input-Output Analysis and Ecological Cumulative Exergy Consumption Analysis in sections 2.1 and 2.2 respectively. Section 3.1 introduces the integrated economic-ecological-social system. Section 3.2 demonstrates how direct ecological inputs are converted into thermodynamic units. Section 3.3 discusses issues related to network analysis and allocation for calculating indirect ecological inputs. Finally, Section 4 illustrates the application of the methodology with a simple network comprising three sectors. Application of this approach to the 1992 U.S. economy is presented in Part II (29).
2. Background 2.1 Input-Output Analysis Input-output Analysis is a general equilibrium model that describes interactions between different units of a network (18,28,31). It can be applied to any network as long as interactions between network units are linear. Such a network may consist of process equipment in a chemical flowsheet, trophic levels in an ecosystem or industry sectors in an economy. A convenient way of representing a linear network is via a transaction table shown in Table 1. Table 1: Transaction Table Output Input S1 S2 S3 Intermediate Input (II) Value Added (VA) Total Input (TI)
S1
S2
S3
Intermediate Output (IO)
X11 X21 X31 I1
X12 X22 X32 I2
X13 X23 X33 I3
O1 O2 O3
V1
V2
V3
X1
X2
X3
Final Demand (FD) F1 F2 F3
Total Output (TO) X1 X2 X3
Here, Xij represents the magnitude of transaction from Unit i to Unit j. Final demand (FD), Fi, represents the output from the i-th unit that does not go to any other unit of the network. Similarly Value Added (VA), Vi, represents the input to Unit i that does not come from any other unit of the network. Intermediate input (II), Ii, is the sum of inputs to Unit i from all other units of the network and intermediate output (IO), Oj, is the sum of outputs from Unit j to all other units of the network.
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As seen in Table 1, Input-Output Analysis establishes a balance on each system unit. It is useful in calculating activities of network units necessary to sustain certain outputs from the system or resulting from certain inputs to the system. This is shown by Equations 1a and 1b.
x = (I - D) -1 × f = T × f
" Dij = X ij /X j
x = (I - γ T ) -1 .v " γ ij = X ij / X i
(1a) (1b)
Here, x is the vector of throughputs of each unit, f is the vector of final demands and v is the vector of value added. D, the direct requirements matrix, represents interactions between system units normalized by Xj and captures first order interactions. T, the Leontief Inverse or total requirements matrix, captures all higher order interactions. g is the matrix of transaction coefficients which is analogous to D, but represents interactions between system units normalized by Xi. Equation 1b is used in the network algebra of Thermodynamic Input-Output Analysis discussed in Section 3.3. Input-Output Analysis has been extensively used in economics to describe monetary interactions between different sectors of the economy (30), in LCA to overcome the problem of system boundaries via Economic Input-Output LCA (eioLCA) (31), in Net Energy Analysis (NEA) to represent energetic interactions between economic sectors (16,17) and trophic levels (15) and in Material Flow Analysis (MFA) to determine material basis of major economies in the world (12,13). A detailed mathematical formulation of Input-Output Analysis and some of its major applications are presented in Appendix A. 2.2 Ecological Cumulative Exergy Consumption Analysis Ecological Cumulative Exergy Consumption (ECEC) analysis (26) is an extension of traditional or Industrial Cumulative Exergy Consumption (ICEC) Analysis (19). ECEC analysis expands the system boundary to include all ecological processes responsible for making natural resources available to the industrial system. This expansion poses additional challenges than ICEC in partitioning ECEC of inputs between multiple outputs, because detailed information about the ecological network and all ecological goods and services is not readily available. The allocation approach used in ECEC analysis is illustrated in Figure 2. The approach depends on the availability of information about the network and its inputs and outputs. Such details are usually available for economic and industrial systems. For such systems, ECEC of the inputs is allocated in proportion to the exergy of the products as illustrated in Figure 2(a)(i). However, the lack of such information about ecosystems makes it difficult to partition the input cumulative exergy between the outputs. Consequently, ECEC analysis avoids allocation by assigning the same ECEC to all products, as shown in Figure 2(b)(i). When two streams are combined, the selected allocation approach needs to be considered in determining the ECEC of the joint stream. As shown by Figure 2(a)(ii), the ECEC of inputs may be directly added if the allocation scheme of Figure 2(a)(i) is used. Otherwise, following the allocation scheme of Figure 2(b)(i), the output stream may be assigned the maximum ECEC of the inputs streams to avoid double counting as shown in Figure 2(b)(ii). As discussed in detail by Hau and Bakshi, both ICEC and ECEC can be calculated based on the algebra of input-output analysis (26). In general, the ECEC of the outputs is related to the exergy of ecological inputs as,
C = Γ i × τ n × Bn
5
(2)
Here, C is an m×1 vector of CEC throughputs of industry sectors, Γi is a m×m allocation matrix, τn is the diagonal matrix of the transformity of the natural resources and Bn is the m×1 vector representing the direct inputs of the natural resource expressed in exergy units. The allocation matrix represents the network structure and allocation method and is described in more detail in Section 3.3. Equation 2 may be adapted for traditional ICEC analysis by considering tn=1 and Bn to be the exergy of natural resource inputs (26). More details about thermodynamic properties and methods are presented in Appendix B. Exergy ECEC Network 400 20 1000 Branches 100 (i) 600
30
Network Joints (ii)
20
400 10
30
1000
600
(a) Exergy Network Branches (i)
ECEC 20
100
1000
30
Network Joints (ii)
10
30
1000
1000 500
10
1000 1000
(b) Figure 2: Allocation Schemes (a) All output known/ inputs from additive sources (b) Some outputs unknown/ inputs from non-additive dependent sources (26)
3. Thermodynamic Analysis of Ecological and Economic Systems The main objective of the methodology developed in this paper is to determine nature’s contribution to economic sectors. Typically such contribution is in the form of ecological goods like coal and timber and ecosystem services like rain and carbon sequestration. Nature also contributes by dissipating emissions and, thereby, mitigating their potential impact and by absorbing the actual impact. Characteristics of the proposed methodology include the following. · Accounts for the contribution of “free” ecological goods and ecosystem services to each economic sector,
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· Adopts a systematic approach recognizing the underlying network structure, · Complies with basic physical laws such as those of thermodynamics. The rest of this section describes various aspects of this methodology in detail.
3.1. Integrated Economic, Ecological, Social System The integrated Economic-Ecological-Social (EES) system, shown in Figure 3, is driven by three fundamental sources of energy namely solar radiation, tidal forces and geothermal heat. The economy consists of a large number of industry sectors defined according to their Standard Industrial Classification codes (32). The ecological system consists of four conceptual ecospheres namely Lithosphere (land), Hydrosphere (water), Atmosphere (air) and Biosphere (33). The social sphere, also referred to as human resources, consists of consumers. Geothermal Energy
Sun
Ecosystems Lithosphere
Atmosphere
Biosphere
Hydrosphere
Ecosystem impact due to anthropogenic emissions
Tidal Energy
Natural Resources as raw materials
Economy
Ecosystem services for dissipation, ecosystem impact
Emission Impact of emission on human health
Emissions Consumption of (CO2 in natural resources (O2 in air) respiration)
Human Resources
Final Demand
Value Added
Figure 3: Integrated economic-ecological-human resource system. (Solid lines represent tangible interactions, dotted lines represent intangible interactions occurring as a consequence of emissions) Thermodynamically, an EES system is an open system with material and energy flows across the system boundary. In case of a national EES system, for example, energy enters the system from the three fundamental sources of energy and exits in the form of long wave radiation. Similarly, material enters the system in the form of national imports and exits in the form of national exports. Consideration of imports and exports is, however, beyond the scope of this paper.
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Table 2. Interactions between ecosystem, economy, and human resources To
Ecosystem
Economy
Human Resource
· Inter-ecosystem interactions e.g. nutrient transport from soil to plants (implicitly considered by transformity values)
· Ecosystem services such as wind, pollination, carbon sequestration etc. · Ecological goods such as coal, minerals, water, atmospheric nitrogen etc.
· Ecological goods such as atmospheric oxygen · Ecosystem services such as clean air, climate regulation and cultural and recreational values
· Industrial Emissions; available in life cycle inventory databases and toxic release inventory
· Inter-industry interactions; typically captured by economic input-output data
· Final Demand; sale of economic goods and services to consumers
· Anthropogenic emissions e.g. CO2 from breathing and waste water from houses
· Value added; consumption of human resources in the form of employment of labor
· Social Interactions; not considered in this paper
From
Ecosystem
Economy
Human Resource
Table 2 shows various interactions between the economic, ecological and social systems. The tangible interactions, shown by solid lines in Figure 3, include raw materials from and emissions to ecosystems and human resources. Interactions shown with dotted lines in Figure 3 are less tangible and occur as a consequence of emissions. For example, the dotted line between the economy and ecosystems in Figure 3 represents the ecological services required for dissipation of industrial emissions and the impact of emissions on ecosystems. Similarly the dotted line from human resources to economy represents the impact of industrial emissions on human health. Dotted line from ecosystems to human resources represents the impact of anthropogenic emissions on human health. If the complete structure of the EES system shown in Figure 3 and the interactions mentioned in Table 2 are known, nature’s contribution to the economic system can be determined quite easily. For example, if the EES system is assumed to be linear, direct extension of input-output analysis allows calculation of throughput of each ecological and social unit necessary to sustain certain economic activity. In such case the transaction table shown in Table 1 can be expanded by introducing an additional row and a column for each ecological and social unit considered and the algebra of input-output analysis can be directly applied. However, there are at least two challenges; 1. The EES system is not well-understood. Though the network structure for the economic system is well-known in terms of industry sectors defined according to their standard industrial classification (SIC) codes, not much is known about the network structure of 8
ecological and social systems. Such partial knowledge of the EES system prohibits direct extension of input-output analysis. 2. Joint analysis of economic and ecological systems entails use of a common currency or ways for dealing with a diverse set of units. Combining thermodynamic methods from engineering and systems ecology can address both these issues satisfactorily. It can provide a common currency, as any system, economic or ecological, can be considered as a network of energy flows. Similarly thermodynamic methods such as ECEC and emergy analysis can deal with partial information about underlying ecological networks. Money can also provide a common currency by using economic valuation methods to capture the contribution of ecosystems (3,9,10). If monetary values for the ecosystem products and services required by each economic sector were available, the approach proposed in this article may be used to determine the contribution at the sectoral level. As mentioned in Section 1, the proposed thermodynamic approach may complement an economic approach. The flowchart in Figure 5 shows the approach for determining nature’s contribution to industry sectors. It consists of the following tasks. Task 1: Identification and quantification of ecological and human resource inputs
Transformity from Systems Ecology
Allocation Matrix
Task 2: Conversion of ecological and human resource inputs into thermodynamic units (direct inputs)
Material (kg/yr) or energy units (J/yr)
Consistent Thermodynamic Units (sej /yr)
Task 3: Calculation of each industry sector’s throughput using ECEC algorithm
Figure 5: Flowchart of the Methodology Task 1: Identify and quantify ecological and human resource inputs to the economic system. Such inputs include · Ecological products consumed as raw materials in economic activities. · Ecological services required to enable economic activities. · Ecological services needed for dissipating emissions. · Human resources consumed by economic activities in the form of labor employment. · Ecological and Human Resources destroyed due to impact of industrial emissions.
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Task 2: Determine ECEC of ecological inputs using transformity values from systems ecology. These are the direct inputs to economic sectors. Classify the inputs as additive or non-additive. Task 3: Allocate ecological and human resource inputs to economic sectors based on inputoutput data and appropriate network algebra. In this paper, the ECEC methodology is used. Ideally, material or thermodynamic input-output data can be used for the purpose of allocation. However, such data are not yet available. Instead monetary input-output data are used in this analysis. Issues related to network algebra are discussed in detail in Section 3.2. Task 1 relies on having appropriate data and is discussed in detail in Part II (29) for the US economy. Task 2 considers direct ecological inputs, while Task 3 determines indirect ecological inputs. The latter two tasks are discussed in the rest of this section.
3.2. Direct Contribution of Ecosystems Contribution of Ecological Goods. Certain industry sectors, such as agriculture, metallic ores mining, coal mining, crude petroleum and natural gas, agricultural fertilizers and chemicals and water and sanitary services are at the economic-ecological interface and are direct consumers of ecological goods. These are the peripheral economic sectors. Remaining economic sectors rely on peripheral sectors and consume ecological resources indirectly. These are the embedded industry sectors. Data about consumption of ecological products is generally available in material or energy units. To determine nature’s contribution in making these products available to the industrial system transformity values from system ecology are used (4). Hence if B is the exergy rate of consumption of an ecological product and t is its transformity, the ECEC or emergy of nature’s contribution, C, is, C = t .B
(3)
Contribution of Ecological Services. Ecosystem services refer to various natural functions that support industrial activities and are vital to their sustenance. They can be broadly classified into physical and value-based services. For example, dissipation of emissions by wind or water streams and use of geothermal heat or tidal waves for electricity generation are accompanied by material or energy flows. These are the physical ecosystem services. In contrast, several ecosystem services such as, aesthetic, recreational, and cultural services are not accompanied by any material or energy transactions. Such value-based ecosystem services are difficult to quantify via thermodynamics. This work focuses only on physical ecosystem services. Ecosystem services such as wind and water streams are necessary for diluting industrial emissions. The contribution of ecological services can be calculated based on the rate of emission, m, base equilibrium concentration of the pollutant, ξ, and transformity, τ, of the relevant ecological service. The base equilibrium concentration of a pollutant depends on its fate factor (34), f, and the geographic area of the concerned region, A. Alternatively, other atmospheric and hydrologic models can also be used to determine ξ. Base equilibrium concentration of any pollutant depends on the collective action of all industries. Hence to determine ξ mass flow rates of emission are added over n industries. n
x = ( å mi ) × f / A i =1
10
(4)
Equation 5 can be used to calculate wind’s contribution in dissipating emission (34), Cwindi, where ρ is the density of air and v is the average surface velocity of wind. æ r × mi × v 2 ö ÷÷ C wind i = t wind .çç (5) 2x è ø In a similar fashion the contribution of other ecosystem services can be calculated as discussed in (4,34). Impact of emissions. The result of any end-point impact assessment method may be converted to thermodynamic units as follows. Eco-indicator 99, the impact assessment methodology used in this paper, first determines the base concentration of the pollutant as discussed in the previous paragraph. The actual impact of the emission on human or ecosystem health depends on this base concentration and on whether it is more than a certain threshold value. The impact itself depends on the exposure and effect analyses. Eco-indicator 99 measures human health impact in terms of Disability-Adjusted Life Years or DALYs (35,36). DALY measures the total amount of healthy life lost to all causes whether from premature mortality or from some degree of disability during a period of time. Impact on ecosystems is measured in terms of the potentially affected fraction (PAF) or potentially disappeared fraction (PDF) of vascular plant species in the selected geographical area. The results of eco-indicator 99 may be converted to thermodynamic terms as a flow of ECEC due to the impact, which can be viewed as the loss of human or ecological resources or as an additional input to the polluting economic sector. If the amount of the destroyed resource and its transformity are known, the ECEC consumed to absorb the impact may be computed as a thermodynamic measure of the impact. Thus, if m j i is the mass rate of emission of substance j from industry sector i, DALY j is the amount of human resource lost relative to the base equilibrium concentration of substance j and t is the transformity of human resource, the impact of emission on human health, C j i can be calculated using Equation 7. C j i = m j i .DALY j .t
(7)
The approach for computing the transformity of human resources is discussed in the next paragraph. Such an approach can also be used for converting the ecological impact into thermodynamic terms if the transformity of the affected or disappeared species is known. However, this work only considers the human impact of emissions. Contribution of Human Resources. Human Resources represent consumers in the economy. Industry consumes human resources in the form of employment of labor. Moreover, different industry sectors have different average annual payrolls suggesting distinction in skill levels. In this paper, the skill level of a sector’s employees is assumed to be directly proportional to its average annual payroll, Pi. The sector with minimum average annual payroll, Pmin, is assigned the transformity of unskilled labor, τunskilled, which is calculated by dividing total annual ecological cumulative exergy or emergy use of a nation or region by its population (4,22). For other sectors transformity is scaled according to Equation 8. t i = t unskilled .( Pi / Pmin )
(8) Thus, if the number of man hours employed in sector i and its average annual payroll are known, the contribution of human resources to that industry sector can be calculated using Equation 9. C i = hi .t i (9)
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where, hi is the man hours employed. The transformity obtained via Equation 8 may also be used in Equation 7 to convert human impact measured as DALY to ECEC.
3.3. Indirect Contribution of Ecosystems via Network Algebra Once the direct inputs are quantified in thermodynamic units the total throughputs can be readily calculated. Since industry sectors may have multiple inputs and outputs, it becomes necessary to allocate the multiple inputs to a system unit to its various outputs. Many methods have been suggested based on market value, mass, energy or exergy content of outputs. Alternatively, if a process is producing two or more different products avoiding allocation altogether may be appropriate. Techniques for avoiding allocation by altering system boundary have been suggested and are recommended in ISO 14000 standards. In this paper network algebra techniques proposed in ECEC methodology are used. Accordingly, resources are distinguished as either additive or non-additive depending on their source and allocation method. Following the network rules illustrated in Figure 2, two resources can be considered to be additive if their ECEC is calculated via the scheme of Figure 2(a). Otherwise the two resources are considered to be non-additive. Due to the algebra used in emergy analysis, renewable resources are considered to be non-additive and non-renewable resources are considered to be additive. A detailed discussion about various issues related to network algebra in ECEC methodology is presented in (26) and Appendix C. In determining throughputs of the industry sectors both the schemes shown in Figure 2 are used. To begin with, each resource is considered separately. Thus, if there are r1 non-additive resources and r2 additive resources, throughput vectors for each resource can be written using Equation 1b, C
R1 , i
= (I - γ T ) -1 .C n
R1 , i
; "
i = 1,..., r1
(10)
C
R2 , j
= (I - γ T ) -1 .C n
R2 , j
; "
j = 1,..., r2
(11)
R
Here Cn R1,i and Cn 2, j are direct input vectors for the i-th non-additive resource and the j-th additive resource respectively and γ is the allocation matrix, which in this case, is the same as the monetary inter-industry transaction matrix. For calculating C R and C R scheme 1 from Figure 2 is applied because the structure of the economic system and the outputs from each industry sector are completely known. After calculating C R and C R the next step is to determine the total throughputs of industry sectors. Addition of all C R and C R is not appropriate because it leads to double counting. Hence, for combining various inputs, the following guidelines from ECEC methodology are used. 1. Network interactions for either an additive or a non-additive resource considered independently are computed using the scheme of Figure 2(a). 2. Two additive inputs or one additive input and one non-additive input can be added. However, two non-additive inputs cannot be added. 3. For combining two or more non-additive inputs the general principle is to compute network interactions for each input separately using the scheme of Figure 2(a), followed by taking the maximum along each branch of the network as shown by the scheme of Figure 2(b). Hence to determine total throughput vector, Ctotal, the maximum contribution from non-additive resources is added to the sum of contributions from all additive resources. This is shown by Equation 12. 1
1
2
1
12
2
2
C
total
(k ) = max{C (k )}+ å C R (k ) r2
R1, j
2, j
i =1,Lr1
(12)
j =1
The detailed algorithm for ECEC analysis is available in (26).
4. Illustrative Example and Discussion
$500
1
$50
$200
2
$100
$200
$400
$200 3
$200
$100
Economy
$300
$100 $900
$150
$800
$350
Human Resources
Figure 7: Illustrative example This example illustrates the entire methodology discussed in Section 3 for a small fictitious network comprising three sectors. Figure 7 shows the economic input-output structure for this network and Table 3 shows the corresponding inter-industry transaction coefficient matrix, γ. As defined in Equation 1b, γ is derived by normalizing the output from sector i to sector j by the total output from Sector i. Table 3: Allocation Matrix
From\To 1 2 3 FD/HR TO 0.5 0.1 0.2 0.2 1 1 0.25 0.0625 0.5 0.1875 1 2 0.133 0.2 0.067 0.6 1 3 0.28 0.64 1 VA/HR 0.08 The next step is identification and quantification of the natural and human resource inputs to the economic system. This is shown in Figure 8. Two different renewable resources, Ra1 and Rb2; one non-renewable resource, NR1; human resource, HR3; emission, E2; ecosystem service for dissipating emission, ES2; and impact of emission on human health, IM2 have been considered in this analysis. In each case, the subscript represents the sector that gets the direct input of the resource.
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NR
Rb
Ra
Environment
EIM2 Rb2 ES2
Ra1 NR1
0.5
0.0625
0.1
1
0.25 0.2
2
E2
0.5 0.2
0.133 3
Economy
0.067
IM3
HR3
Human Resources
Figure 8: Augmented system. Economic flows are in Figure 7 and Human Resource and ecosystem flows are in Table 4. These flows are converted into thermodynamic units via Equations 3 to 9, as shown in Table 4. The throughput vector, C, is computed for individual resources via Equations 10 and 11, and the total throughput vector, Ctotal, is determined by Equation 12. The results are shown in graphical form in Figure 9 with more details available in Appendix C. This figure shows that the indirect effects are just as important as the direct effects. For example, Sectors 1 and 3 have significant impact on human health even though they do not have any direct emissions. This indirect impact is on account of their interaction with Sector 2 that does have direct emission. Moreover, human resource, ecosystem service and impact of emission are just as important as other renewable and non-renewable resources. Inclusion of these factors, which are ignored in traditional ICEC analysis, may give dramatically different results. Importance of human resources, ecosystem services and impact of emissions is further underscored in the second part of this paper (29) where real natural resource consumption and economic data is used for 1992 US economy comprising 91 industry sectors.
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Table 4: Ecological resource consumption data for illustrative example Stream Number NR1 Ra1 Rb2 HR3 † E2 ES2 ‡ IM2 §
†
Type Non-renewable Renewable Renewable Human Resource Emission Ecosystem Service Impact on Human health
Physical Data 10tons/d 50tons/d 100,000J/d 50hr/d 2kg/d 2kg/d 2kg/d
Transformity 100,000sej/ton 20,000sej/ton 1sej/J 5,000sej/hr 8.1sej/J 1,000,000sej/hr
ECEC (sej/d) 1,000,000 1,000,000 100,000 250,000 2,000,000 1,752,000
Man hours employed, hi = 50 hr/d, average annual payroll, Pi = $80/d, minimum average annual payroll, Pmin = $16/d, Transformity of unskilled labor, tunskilled = 1,000 sej/hr C = hi . (Pi/Pmin) .tunskilled = 250,000 sej/d ‡ Assumed to be wind for dissipating styrene emission. Mass flow rate of emission, m = 2 kg/d, Base equilibrium concentration, ξ = 1 g/m3, Density of air ρ = 1,230 g/m3, Average wind velocity, v = 10 m/s, τwind = 8.1 sej/J Kinetic energy of wind required for dissipating styrene emission = (ρ.m.v2)/2.ξ = 123,000 J/d C = (ρ.m.v2. τwind)/2.ξ = 2,000,000 sej/d § Mass flow rate of emission, m = 2 kg/d, Disability Adjusted Life Year, DALY = 0.1 yr/kg, τ =1,000 sej/hr C = m . DALY . (365 day/yr) . (24 hr/day) . τ =1,752,000 sej/d 6
3
x 10
6
(a): Non renewable resource, NR1
3
sej/d
sej/d
2
0
1 4
(c): Renewable resource 2, Rb2
4
2
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x 10
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(e): Ecosystem Service, ES2
x 10
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(f): Impact on Human Health, IM2
2 1
1 0
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(b): Renewable resource 1, Ra1
1
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15
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Figure 9: Direct and Indirect ECEC inputs for network in Figure 8. (Blue region is direct input. Yellow region is indirect. X-axis is sector number.)
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Total ECEC throughput
6
x 10
6
3
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2.5
4
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Total ICEC throughput per unit economic activity
Total ECEC throughput per unit economic activity 500
8000
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300 J/$
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2
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200 2000
0
100
2
1
0
3
(a)
1
2
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(b)
Figure 10. (a) Total ECEC throughput in each sector and Total ECEC throughput in each sector per unit of economic activity (b) Total ICEC throughputs with impact and total ICEC with throughputs with impact per unit economic activity for three sectors (Blue region is direct input, Yellow is indirect) Figure 10 shows the total resource throughputs as well as resource throughputs per unit economic activity of the three sectors. This is done by combining results obtained in Figure 9 with the help of Equation 12. Figure 10 (a) shows that the total ECEC throughput of Sector 1 is more than that of Sector 2 whereas the total ECEC throughput per unit economic activity of sector 2 is more than that of Sector 1. This indicates that though Sector 1 is more dependent on ecological and human resources than Sector 2, it values ecological resources less. This may be on account of the failure of market prices that determine the economic size of an industry sector to fully and properly appreciate the value of ecological and human resources. The ECEC to money ratio may also be influenced by market distortions such as subsidies or due to higher relative economic value of the products. Part II of this series presents ECEC to money ratios for all 91 industry sectors in 1992 US economy along with a detailed analysis of their significance. Figure 10(b) shows the results of a traditional ICEC analysis that ignores the contribution of ecological goods and services. These results are obtained by using a transformity of unity for all
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resources listed in Table 4 and using the allocation schemes of Figure 2(a). The impact of emissions on human health is considered in Figure 10(b). Comparison of Figures 10(a) and 10(b) indicates that traditional ICEC analysis can grossly underestimate the contributions from ecological and human resources. Moreover, the results of ICEC analysis may be misleading since this approach treats all natural resources as of identical quality. In contrast, ECEC analysis captures the vastly different energy qualities of natural resources to provide more holistic and useful results. Application of the proposed approach and detailed analysis of the 1992 U.S. economy are described in Part II of this series.
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