Dynamic Models of Fixed Capital Stocks and Their Application in Industrial Ecology

Industrial assets or fixed capital stocks are at the core of the transition to a low‐carbon economy. They represent substantial accumulations of capital, bulk materials, and critical metals. Their lifetime determines the potential for material recycling and how fast they can be replaced by new, more efficient facilities. Their efficiency determines the coupling between useful output and energy and material throughput. A sound understanding of the economic and physical properties of fixed capital stocks is essential to anticipating the long‐term environmental and economic consequences of the new energy future. We identify substantial overlap in the way stocks are modeled in national accounting, dynamic material flow analysis, dynamic input‐output (I/O) analysis, and life cycle assessment (LCA) and we merge these concepts into a common framework for modeling fixed capital stocks. We demonstrate the usefulness of the framework for simultaneous accounting of capital and material stocks and for consequential LCA. We apply the framework to design a demand‐driven dynamic I/O model with dynamic capital stocks, and we synthesize both the marginal and attributional matrix of technical coefficients (A‐matrix) from detailed process inventories of fixed assets of different age cohorts and technologies. The stock modeling framework allows researchers to identify and exploit synergies between different model families under the umbrella of socioeconomic metabolism.     

The energy embodied in the first and second industrial revolutions

Understanding the nature of energy embodied in economies is essential to assessing their potential to grow or transform sustainably. As the first country to undergo industrialization, study of the United Kingdom during the Industrial Revolution is particularly important for understanding transformational processes. Historical accounts describe how exploitation of Britain's coal reserves supported the evolution of steel production, railways, and other industries; yet reconstructions of the UK's eighteenth/nineteenth century economy have found relatively small contributions from coal mining to economic growth. Here, economic input‐output models for 1841 and 1907 are used to calculate the coal embodied in capital investment, consumption, and exports. Most of the coal was embodied in consumption in 1841, with coal embodied in exports growing particularly fast by 1907. The coal embodied in capital was smaller, but the energy intensity of investment was about four times larger than the energy intensity of consumption. The coal embodied in building the capital stock, much of it used for production of materials such as iron, steel, and bricks, was important for economic growth and transformation. Using historical proxy data, it is estimated that ～1.1 billion imperial tons of coal (34,000 PJ) were used to build the UK's capital assets between 1760 and 1913. The conceptual model developed here helps to explain the role of energy in economic growth and is important to contemporary sustainable development. This article met the requirements for a gold – gold JIE data openness badge described at http://jie.click/badges .     

Environmental Impacts of Capital Formation

The investment in capital goods is a well‐known driver of economic activity, associated resource use, and environmental impact. In national accounting, gross fixed capital formation (GFCF) constitutes a substantial share of the total final demand of goods and services, both in terms of monetary turnover and embodied resources. In this article, we study the structure of GFCF and the environmental impacts associated with it on a global scale, and link it to measures of development. We find that the share of GFCF as part of the total carbon footprint (CF) varies more across countries than GFCF as a share of gross domestic product (GDP). Countries in early phases of development generally tend to invest in resource‐intensive assets, primarily infrastructure and machinery, whereas wealthier countries invest in less resource‐intensive assets, such as computers, software, and services. By performing a structural decomposition analysis, we assess the relative importance of investment structure and input‐output multipliers for the difference in carbon intensity of capital assets, and find that the structure of investments plays a larger role for less‐developed countries than for developed countries. We find a relative decoupling of the CF of GFCF from GDP, but we can neither confirm nor rule out the possibility of an absolute decoupling.     

Effects of Using Heterogeneous Prices on the Allocation of Impacts from Electricity Use: A Mixed‐Unit Input‐Output Approach

Economic input‐output life cycle assessment (IO‐LCA) models allow for quick estimation of economy‐wide greenhouse gas (GHG) emissions associated with goods and services. IO‐LCA models are usually built using economic accounts and differ from most process‐based models in their use of economic transactions, rather than physical flows, as the drivers of supply‐chain GHG emissions. GHG emissions estimates associated with input supply chains are influenced by the price paid by consumers when the relative prices between individual consumers are different. We investigate the significance of the allocation of GHG emissions based on monetary versus physical units by carrying out a case study of the U.S. electricity sector. We create parallel monetary and mixed‐unit IO‐LCA models using the 2007 Benchmark Accounts of the U.S. economy and sector specific prices for different end users of electricity. This approach is well suited for electricity generation because electricity consumption contributes a significant share of emissions for most processes, and the range of prices paid by electricity consumers allows us to explore the effects of price on allocation of emissions. We find that, in general, monetary input‐output models assign fewer emissions per kilowatt to electricity used by industrial sectors than to electricity used by households and service sectors, attributable to the relatively higher prices paid by households and service sectors. This fact introduces a challenging question of what is the best basis for allocating the emissions from electricity generation given the different uses of electricity by consumers and the wide variability of electricity pricing.     

Avoiding investment in fossil fuel assets

Reducing greenhouse gas emissions requires a transformation of capital assets in the economy, especially those for energy supply. This paper explores the hypothesis that economically efficient decarbonization occurs when the demand for fossil fuels declines at the same rate as their capital assets depreciate. In theory this means that new investments in fossil fuel assets are avoided, but without incurring stranded assets. We examine the practicality of this hypothesis using a biophysical economic model of the US energy supply system, with an example focused on impacts of electric vehicles on the petroleum supply chain. We specifically address two questions: (1) What rate of market penetration for electric vehicles is necessary to avoid investments in the petroleum-related assets? (2) How do the costs of upstream capital assets change with the transformation to electric vehicles? High annual depreciation rates for oil refineries (δ = 9.47%) and assets for crude oil extraction (δ = 8.23%) have important impacts on results. To avoid new investment in oil refining assets through widespread electrification of light-duty vehicles, the vehicle stock would need to be transformed in just 4 or 5 years. Under most scenarios, some petroleum pipelines will likely become stranded assets due to their low rate of depreciation (δ = 2.48%). In some scenarios, additional investments in wind and solar power generation surpass oil and gas extraction for about 5 years during the transformation to electric vehicles. Once built, however, wind and solar capital assets last longer, as shown by their low rate of depreciation (δ = 3.26%).     

Capital in the American carbon,energy, and material footprint

Stocks of fixed capital play a vital role in fulfilling basic human needs and facilitating industrial production. Their build‐up requires great quantities of energy and materials, and generates greenhouse gas emissions and other pollution. Capital stocks influence economic production and environmental pollution through their construction and over subsequent decades through their use. We perform an environmental footprint analysis of total consumption, capital investment, and capital consumption in the United States for 2007 and 2012. In 2012, capital consumption accounted for 13%, 19%, and 40% of total carbon, energy, and material footprints, respectively. Housing, federal defense, state and local government education and other services (including household consumption of roads), personal transport fuels, and hospitals are the consumption sectors with largest capital footprints. These sectors provide fundamental needs of shelter, transport, education, and health, underlying the importance of capital services. Endogenizing capital causes the biggest proportional increase to footprints of sectors with low environmental multipliers. This work builds upon existing input‐output models of production and consumption in the United States, and provides a capital‐inclusive database of carbon, energy, and material footprints and multipliers for 2007 and 2012. This article met the requirements for a gold – gold JIE data openness badge described at http://jie.click/badges .     

Eco‐efficiency Based on Social Performance and its Relationship with Financial Performance

As corporate responsibility for environmental management has gained attention, eco‐efficiency has become recognized as an important concept for improving the social performance of the business sector as well as that of the public sector. Improving eco‐efficiency is widely accepted not only as a means of increasing economic value, but also as a means of reducing environmental effects. However, managing for eco‐efficiency should take into consideration the differences among industries, because the impact of eco‐efficiency on financial and social performance varies among industries. To explore this variation, we conducted a cross‐industry analysis of eco‐efficiency based on social performance using data envelopment analysis (DEA). DEA measures relative efficiency and is a useful tool for taking into account the relative importance of industry‐specific characteristics. Using DEA, eco‐efficiency scores were derived based on the ratio of two factors of social performance: (1) value‐added inducing and production‐inducing economic spillover effects and (2) the amount of greenhouse gases emitted and energy used. Then, we identified the relationships between our eco‐efficiency score and financial performance, which is a measure of the firm's stability. The case study is based on 272 firms in 16 industries in South Korea. Results show that firms in product manufacturing and service‐intensive industries tend to have higher eco‐efficiency scores than those in raw material or chemical‐intensive industries. In addition, most of the industries reveal no relationship between traditional financial performance metrics and eco‐efficiency scores. A handful of industries had significant relationships with one or more financial performance metrics; in some cases, these relationships were negative, whereas in others they were positive. Surprisingly, almost all industries have no significant relationships between eco‐efficiency and financial performance. This result implies that government support for policies that reward firms that attempt to be eco‐efficient are needed, or that other nonfinancial metrics that influence eco‐efficiency, such as employment and brand reputation, should be considered. This article is expected to support policy makers as they formulate industry‐specific environmental strategies.     

An Australian Multi‐Regional Waste Supply‐Use Framework

The production of waste creates both direct and indirect environmental impacts. A range of strategies are available to reduce the generation of waste by industry and households, and to select waste treatment approaches that minimize environmental harm. However, evaluating these strategies requires reliable and detailed data on waste production and treatment. Unfortunately, published Australian waste data are typically highly aggregated, published by a variety of entities in different formats, and do not form a complete time‐series. We demonstrate a technique for constructing a multi‐regional waste supply‐use (MRWSU) framework for Australia using information from numerous waste data sources. This is the first MRWSU framework to be constructed (to the authors' knowledge) and the first sub‐national waste input‐output framework to be constructed for Australia. We construct the framework using the Industrial Ecology Virtual Laboratory (IELab), a cloud‐hosted computational platform for building Australian multi‐regional input‐output tables. The structure of the framework complies with the System of Environmental‐Economic Accounting (SEEA). We demonstrate the use of the MRWSU framework by calculating waste footprints that enumerate the full supply chain waste production for Australian consumers.     

The Energy Structure of the Canadian Economy

We developed a model of a national economy in which the phenomena of supply, demand, economic growth, and international trade are represented in terms of energy flows. In examining the structure of the economy, we distinguish between the energy embodied in capital assets used in the production and distribution of energy and that embodied in capital assets and goods that consume energy. Sources used to quantify the energy flows include: end‐use energy data by economic sector; International Energy Agency–style national energy balances, and national input‐output tables. As an example, the Canadian economy for 2008 produced 16.97 exajoules (EJ) of energy, which after net export of 6.16 EJ and other adjustments left a total primary energy consumption of 10.61 EJ. The energy supply and distribution sectors used close to 32% (3.36 EJ) of total primary consumption. Analysis of primary energy consumption shows that 25.14% was embodied in household consumption, 22.85% was consumed directly by households, 7.88% was embodied in government services, and 34.07% was embodied in exports. Of significance to economic growth, 7.14% was embodied in capital in energy demanding sectors, 1.25% in energy consuming personal assets, and 1.52% in supply sector capital. The energy return on energy investment was relatively constant, averaging 5.14 between 1990 and 2008. Capital investments required to decouple the Canadian economy from its dependence on fossil fuels are discerned.     

Disaggregating the Power Generation Sector for Input‐Output Life Cycle Assessment

The electric power industry plays a critical role in the economy and the environment, and it is important to examine the economic, environmental, and policy implications of current and future power generation scenarios. However, the tools that exist to perform the life cycle assessments are either too complex or too aggregated to be useful for these types of activities. In this work, we build upon the framework of existing input‐output (I‐O) models by adding data about the electric power industry and disaggregating this single sector into additional sectors, each representing a specific portion of electric power industry operations. For each of these disaggregated sectors, we create a process‐specific supply chain and a set of emission factors that allow calculation of the environmental effects of that sector's output. This new model allows a much better fit for scenarios requiring more specificity than is possible with the current I‐O model.     

The Corruption Footprints of Nations

In this study, we innovatively apply multiregional input‐output analysis to calculate corruption footprints of nations and show the details of commodities that use the most employment affected by corruption (EAC), as they flow between countries. Every country's corruption footprint includes its domestic corruption and the corruption imported by global supply chains to meet final demand. Our results show that, generally, the net corruption exporters are developing countries, with the exception of Italy where corruption is likely to be more affected by political and cultural factors than economic factors. China is the largest gross corruption exporter, and India follows close behind, with clothing as one of the industries in which the most people are affected by corruption. This is because: (1) China and India are major clothing exporters, thus many workers are employed in the clothing industry within the country as well as in countries providing intermediate commodities by supply chains, and (2) corruption is high in China and India. Our results can be useful to identify where regulations to combat corruption can have the greatest impact. More important, the method we use can be applied to link corruption to other economic and social aspects of trade, such as working conditions, thus making it possible to find avenues for tackling the problem that are not usually considered in anticorruption strategies.     

A Supply‐Use Approach to Waste Input‐Output Analysis

In this article, we extend Namakura and Kondo's waste input‐output (WIO) framework by incorporating a supply‐use formalism, resulting in waste supply‐use tables (WSUTs). We present the theoretical underpinnings of the WSUT and, in particular, the transition from Nakamura and Kondo's WIO form to the new WSUT form. Further, we offer a mathematical proof of the equivalence of WIO and WSUT multipliers. We illustrate the workings of the WSUT calculus using economic and waste data for the Australian economy in 2008–2009.     

Agricultural sustainability: concepts, principles and evidence

Concerns about sustainability in agricultural systems centre on the need to develop technologies and practices that do not have adverse effects on environmental goods and services, are accessible to and effective for farmers, and lead to improvements in food productivity. Despite great progress in agricultural productivity in the past half-century, with crop and livestock productivity strongly driven by increased use of fertilizers, irrigation water, agricultural machinery, pesticides and land, it would be over-optimistic to assume that these relationships will remain linear in the future. New approaches are needed that will integrate biological and ecological processes into food production, minimize the use of those non-renewable inputs that cause harm to the environment or to the health of farmers and consumers, make productive use of the knowledge and skills of farmers, so substituting human capital for costly external inputs, and make productive use of people's collective capacities to work together to solve common agricultural and natural resource problems, such as for pest, watershed, irrigation, forest and credit management. These principles help to build important capital assets for agricultural systems: natural; social; human; physical; and financial capital. Improving natural capital is a central aim, and dividends can come from making the best use of the genotypes of crops and animals and the ecological conditions under which they are grown or raised. Agricultural sustainability suggests a focus on both genotype improvements through the full range of modern biological approaches and improved understanding of the benefits of ecological and agronomic management, manipulation and redesign. The ecological management of agroecosystems that addresses energy flows, nutrient cycling, population-regulating mechanisms and system resilience can lead to the redesign of agriculture at a landscape scale. Sustainable agriculture outcomes can be positive for food productivity, reduced pesticide use and carbon balances. Significant challenges, however, remain to develop national and international policies to support the wider emergence of more sustainable forms of agricultural production across both industrialized and developing countries.     

Biophysical economic interpretation of the Great Depression: A critical period of an energy transition

The objective of this paper is to explain the cause and proceedings of the 1930s Great Depression from a biophysical economic perspective. The Depression was a painful episode in the socio-technological transition from a coal/railroad regime to one based on hydrocarbons, motor vehicles, and electricity. The beginning—the Great Crash of October 1929—corresponded with drastic cuts in oil prices and announcement of oil supply certainty, following discovery of huge oilfields in the US Southwest. The Depression principally centered on a change from railroads to motor-vehicle-based transportation, but was long and drawn-out due to the hegemonic power that the railroads held over the US economy. The late 1920s saw increased use of hydrocarbon-based technologies, but the emerging technologies were still reliant on the old technological system. Methods of biophysical economics, mapping energy flows to capital formation, show the critical role of railroads in the Depression. In 1929, railroads accounted for 24% of the non-residential capital stock; they delivered between 70% and 76% of energy needs; and 69% of energy required for capital formation. Thus a hypothesis emerges that dwindling investment in the railroads was a major constraint on the economy. In biophysical terms, the US economy's main energy delivery system—coal carried by railcars—was hamstrung. Energy flow Sankey diagrams for 1929 and 1939 show the gradual change in energy systems that occurred over the Depression.     

Consumption‐based Material Flow Accounting

In 2007, imports accounted for approximately 34% of the material input (domestic extraction and imports) into the Austrian economy and almost 60% of the GDP stemmed from exports. Upstream material inputs into the production of traded goods, however, are not yet included in the standard framework of material flow accounting (MFA). We have reviewed different approaches accounting for these upstream material inputs, or raw material equivalents (RME), positioning them in a wider debate about consumption‐based perspectives in environmental accounting. For the period 1995–2007, we calculated annual RME of Austria's trade and consumption applying a hybrid approach. For exports and competitive imports, we used an environmentally extended input‐output model of the Austrian economy, based on annual supply and use tables and MFA data. For noncompetitive imports, coefficients for upstream material inputs were extracted from life cycle inventories. The RME of Austria's imports and exports were approximately three times larger than the trade flows themselves. In 2007, Austria's raw material consumption was 30 million tonnes or 15% higher than its domestic material consumption. We discuss the material composition of these flows and their temporal dynamics. Our results demonstrate the need for a consumption‐based perspective in MFA to provide robust indicators for dematerialization and resource efficiency analysis of open economies.     

A Hybrid‐Unit Energy Input‐Output Model to Evaluate Embodied Energy and Life Cycle Emissions for China's Economy

We develop a hybrid‐unit energy input‐output (I/O) model with a disaggregated electricity sector for China. The model replaces primary energy rows in monetary value, namely, coal, gas, crude oil, and renewable energy, with physical flow units in order to overcome errors associated with the proportionality assumption in environmental I/O analysis models. Model development and data use are explained and compared with other approaches in the field of environmental life cycle assessment. The model is applied to evaluate the primary energy embodied in economic output to meet Chinese final consumption for the year 2007. Direct and indirect carbon dioxide emissions intensities are determined. We find that different final demand categories pose distinctive requirements on the primary energy mix. Also, a considerable amount of energy is embodied in the supply chain of secondary industries. Embodied energy and emissions are crucial to consider for policy development in China based on consumption, rather than production. Consumption‐based policies will likely play a more important role in China when per capita income levels have reached those of western countries.     

The Cost of Sustainability Capital and the Creation of Sustainable Value by Companies

We develop and apply a valuation methodology to calculate the cost of sustainability capital, and, eventually, sustainable value creation of companies. Sustainable development posits that decisions must take into account all forms of capital rather than just economic capital. We develop a methodology that allows calculation of the costs that are associated with the use of different forms of capital. Our methodology borrows the idea from financial economics that the return on capital has to cover the cost of capital. Capital costs are determined as opportunity costs, that is, the forgone returns that would have been created by alternative investments. We apply and extend the logic of opportunity costs to the valuation not only of economic capital but also of other forms of capital. This allows (a) integrated analysis of use of different forms of capital based on a value-based aggregation of different forms of capital, (b) determination of the opportunity cost of a bundle of different forms of capital used in a company, called cost of sustainability capital, (c) calculation of sustainability efficiency of companies, and (d) calculation of sustainable value creation, that is, the value above the cost of sustainability capital. By expanding the well-established logic of the valuation of economic capital in financial markets to cover other forms of capital, we provide a methodology that allows determination of the most efficient allocation of sustainability capital for sustainable value creation in companies. We demonstrate the practicability of the methodology by the valuation of the sustainability performance of British Petroleum (BP).     

Advancements in Input‐Output Models and Indicators for Consumption‐Based Accounting

The use of global, multiregional input‐output (MRIO) analysis for consumption‐based (footprint) accounting has expanded significantly over the last decade. Most of the global studies on environmental and social impacts associated with consumption or embodied in international trade would have been impossible without the rapid development of extended MRIO databases. We present an overview of the developments in the field of MRIO analysis, in particular as applied to consumption‐based environmental and social footprints. We first provide a discussion of research published on various global MRIO databases and the differences between them, before focusing on the virtual laboratory computing infrastructure for potentially making MRIO databases more accessible for collaborative research, and also for supporting greater sectoral and regional detail. We discuss work that includes a broader range of extensions, in particular the inclusion of social indicators in consumption‐based accounting. We conclude by discussing the need for the development of detailed nested MRIO tables for investigating linkages between regions of different countries, and the applications of the rapidly growing field of global MRIO analysis for assessing a country's performance toward the United Nations Sustainable Development Goals.     

Unintentional Flow of Alloying Elements in Steel during Recycling of End‐of‐Life Vehicles

Alloying elements in steel add a wide range of valuable properties to steel materials that are indispensable for the global economy. However, they are likely to be effectively irretrievably blended into the steel when recycled because of (among other issues) the lack of information about the composition of the scrap. This results in the alloying elements dissipating in slag during steelmaking and/or becoming contaminants in secondary steel. We used the waste input‐output material flow analysis model to quantify the unintentional flows of alloying elements (i.e., chromium, nickel, and molybdenum) that occur in steel materials and that result from mixing during end‐of‐life (EOL) processes. The model can be used to predict in detail the flows of ferrous materials in various phases, including the recycling phase by extending steel, alloying element source, and iron and steel scrap sectors. Application of the model to Japanese data indicates the critical importance of the recycling of EOL vehicles (ELVs) in Japan because passenger cars are the final destination of the largest share of these alloying elements. However, the contents of alloying elements are rarely considered in current ELV recycling. Consequently, the present study demonstrates that considerable amounts of alloying elements, which correspond to 7% to 8% of the annual consumption in electric arc furnace (EAF) steelmaking, are unintentionally introduced into EAFs. This result suggests the importance of quality‐based scrap recycling for efficient management of alloying elements.     

我国农业生态效率的时空差异

农业生态效率是按照定量化的方式反映区域农业发展可持续发展水平,可以作为决策者制定政策的一个抓手。利用基于机会成本的经济核算方法对我国2003—2010年的农业生态效率进行总体分析与评价,并利用回归模型分析农业生态效率的影响因素。结果表明:我国农业生态效率总体水平比较低,但呈逐年好转的趋势,其中劳动力资源和COD环境要素在不同时期对生态价值增长起到关键性作用;农业生态效率空间分布特征显著,秦岭-淮河以北的省市区和传统粮食主产区的农业生态效率相对较低;区域资源环境禀赋条件有助于农业生态效率的提高,但是农资投入和农业政策支持与农业生态效率呈显著负相关,未来进一步提升农业生产资源与环境要素合理配置是保障农业生产可持续的必然选择。