MFA Training Workshop Eurostat / EEA / ETC-WMF Overview & Concepts Stephan Moll MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Content Overview Concept of “Industrial Metabolism” What is MFA in general ? Eurostat method Basic Conceptual Foundations Mass balancing principle System analysis Role within Environmental Accounting/SEEA and relation to NA Concepts, Definitions and Classifications General presentation of economy-wide MFA System Boundaries Categories of flows (FLOWS) Categories of materials (MATERIAL) Indicators MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

1 Overview MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Overview: Concept of “Industrial Metabolism” Human’s sphere is physically embedded in natural bio-geo-chemical cycles The physical interface between economy and environment forms origin of various environmental impacts by humans: local physico-chemical changes (e.g. acidification), effects of excessive nutrients (e.g. eutrophication), mechanical destruction (e.g. excavation), more structural effects (e.g. landscape changes or habitat disruption). Many environmental problems are directly or indirectly linked to the material throughput of the economy, such as air emissions in the context of the climate change issue or the environmental problems related to waste. MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Overview: What is MFA in general ? Material Flow Accounting (MFA) refers to a number of methodologies which can be used to provide information on industrial metabolism (“family” of analytical tools) MFA refers to accounts in physical units usually in terms of kilograms; (mass is the physical basic unit to characterize materials; kilograms are the measurement unit for mass) …comprising a defined set of processes (e.g. extraction, production, transformation, consumption, recycling, and disposal) interlinked by materials flows, …can be carried out on different levels, ranging from international, national and regional scales, down to the community or company level Subject of MFA can differ: substances (chemical elements and compounds), raw materials, base materials, products, manufactures, wastes, emissions to air or water etc. MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Overview: What is MFA in general ? Examples of MFA tools: Substance Flow Analyses (SFA) trace the flow of selected chemical substances or compounds through the society (e.g. zinc, mercury, nitrogen, phosphorous etc.) Product flow accounts trace the flow of certain products or product groups through the economic system (e.g. timber, packaging, cars etc.) ..some authors also include Life Cycle Inventories (as part of Life Cycle Impact Assessment methodology) under the wider MFA “toolbox” Economy-wide material flow accounts systematically show the bulk material flows through society in a comprehensive way. … in order to provide macro-level information on the physical performance of the national economies Physical Input-Output Tables (PIOT) MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Overview: “Eurostat” MFA method Methodological Guide published by Eurostat 2001: “Economy-wide material flow accounts and derived indicators” … constitutes one specific MFA method/tool Objective: physical book-keeping of the economy-environment-system MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Overview: “Eurostat” MFA method = accounting framework which allows derivation of a number of indicators Eurostat MFA guide describes methodology for this accounting framework and gives recommendations - economy is treated as “black-box” NOTE: “Accounting Framework” is composed of modules (called “accounts”), implying that not all “accounts” have to be done (i.e. one can start with some more important and continue with some others later MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Conceptual Foundations 2 Conceptual Foundations MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Conceptual Foundations: mass balancing Thermodynamics: conservation of matter and energy … leading to mass balancing principle: input = output Mass balanced accounts can be compiled for certain systems or processes (e.g. consumption & production processes, company, region, national economies, etc.) total inputs = total outputs +/- stock changes NOTE: similarity to National Accounts MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Conceptual Foundations: system analysis Two basic elements according to system analysis theory: processes/systems flows Forms of presentation: Flow charts (“boxes and arrows”) T-accounts (balances) Input-Output Tables MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Role within Environmental Accounting/SEEA Relation to System of National Accounts (SNA) Eurostat MFA method is part of environmental accounting work at Eurostat Links to other Environmental Accounting tools (e.g. Natural Resource Accounting, NAMEA, PIOT etc.) UN System of Integrated Environmental and Economic Accounting (SEEA 2003) mentions economy-wide MFA and derived indicators as one method of Physical Flow Accounts Compatibility to System of National Accounts is pursued in principal (system boundaries, definition of stocks etc.) MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Concepts, Definitions, and Classifications 3 Concepts, Definitions, and Classifications MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

General Presentation of economy-wide MFA Accounts Eurostat Guide offers a system of accounts allowing a stepwise progression towards a complete material balance. (3.01 – 3.03) These accounts (modules) are called economy-wide material flow accounts. Each account (T-account) allows the derivation of one or several indicators As in a sequence of accounts each step requires additional data (6.01 – 6.18) MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

General Presentation of economy-wide MFA general simplified scheme Accounting conventions: Water is excluded: about one order of magnitude higher than other materials; separate presentation is recommended Air is excluded: exceptional oxygen used for combustion processes MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

General Presentation of economy-wide MFA => scheme without water and air NOTE: the step from Figure 4 to Figure 5 implies violation of mass balancing principle ! => need, to introduce “memorandum items for balancing” MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

General Presentation of economy-wide MFA composite material balance MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

System boundaries Definition All material flows crossing the functional system-boundary between “environment” and “economy” (3.09) … by the extraction of primary (i.e., raw, crude or virgin) materials from the national environment and the discharge of materials to the national environment; by the political (administrative) borders that determine material flows to and from the rest of the world (imports and exports). Inputs from the environment = the extraction or movement of natural materials on purpose and by humans or human-controlled means of technology (i.e., involving labour). (3.10) Output released to the environment = means that society loses control over the location and composition of the materials. (3.10) Natural flows into and out of a geographical territory are excluded. Material flows within the economy are not presented in economy-wide MFA and balances. (3.11) => “black box” NOTE: products, e.g. cars, refrigerators etc. are missing ! MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

… and its relation to system boundaries Material Stocks … and its relation to system boundaries Stocks of materials that belong to the economy … man-made fixed assets as defined in the national accounts such as infrastructures, buildings, vehicles and machinery as well as inventories of finished products ... durable goods purchased by households for final consumption … (3.15) => material stocks are within economy (“black box”). Why do we have to consider material stocks? (1) because they make up the difference between input and output (2) because in some cases of stocks, we have to decide whether to treat them as economy or environment (e.g. landfills, cultivated forests) (3.17 – 3.20) NOTE: definition differs from SNA convention (i.e. also from PIOT) MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Classifications For purpose of classification, one material flow is characterised twofold: categories of flows (FLOW) characteristic of the flow as such, e.g. “from where to where it is flowing”, e.g. whether it is an input or output flow categories of materials (MATERIAL) chemical or physical character, e.g. renewable or non-renewable, fossil fuel, etc. NOTE: in practical compilation work, FLOW categories are usually superior to MATERIAL categories MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Categories of Flows (FLOWS) Section 3.3 (3.29 – 3.57) A first (simple) distinction is made between input flows and output flows A second distinction is made along three dimensions (pairs of distinction) (1) the territorial dimension to indicate the origin and destination of flows: domestic <–> rest of the world (ROW); (2) the product-chain or life-cycle dimension to indicate whether flows are directly observed or calculations of up-stream material requirements: direct <–> indirect; (3) the product/non-product dimension to indicate whether flows enter/leave economic system as priced products or not: (3a) input: used <–> unused (3b) output: processed <–>non-processed MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Categories of Flows (FLOWS) Section 3.3 (3.29 – 3.57) MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Categories of Flows (FLOWS) Inputs: Domestic extraction used (DEU) Unused domestic extraction (UDE) Imports Indirect flows (inputs) associated to imports Outputs: Domestic processed output to nature Disposal of unused domestic extraction Exports Indirect flows (outputs) associated to exports direct material inputs i.e. actually entering the domestic economic system MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Categories of Materials (MATERIAL) Each FLOW can be further disaggregated according to its physical and/or chemical characteristic. We call this MATERIAL categories From a policy perspective, it seems useful e.g. to distinguish between renewable and non-renewable material flows. Or, with regards to environmental impacts it seems useful to distinguish between fossil fuels and metals etc. since they may have different potentials for harming the environment. The MATERIAL categories, as used to disaggregate the FLOW categories, will be introduced in the following units. Example: FLOW category “domestic extraction used” (DEU); 1st level: - fossil fuels - minerals - biomass MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Indicators derivable - overview A set of indicators can be derived from a full-fledged composite material balance (Fig 9) Broadly, the are grouped into three groups: 1. Input indicators (DMI, TMI, TMR) DMI: Direct Material Input TMR: Total Material Requirement 2. Consumption indicators (DMC, TMC, NAS, PTB) DMC: Direct Material Consumption TMC: Total Material Consumption NAS: Net Additions to Stock PTB: Physical Trade Balance 3. Output indicators (DPO, TDO, DMO, TMO) For each indicator, an accounting identity is defined MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Indicators derivable - overview MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Indicators derivable – interpretation and selection Interpretation and selection of indicators … it is not clear which of the indicators will be considered the most relevant and useful in the longer term depends on political priority settings, and target question (what is wanted to be expressed by the indicator?) MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA

Thank you ! MFA Training Workshop, Luxembourg, 14-15 June 2004 Wuppertal Institut SMO/2004/MFA