1. Emergy and Ecological Economics Valuing Real Wealth Thanks to Mark Brown, Matt Cohen, Howard Odum, et al. Produced by Tom Abel

2. Money as Value  When we buy something, energy and materials flow in counter-current to money

3. Money as Value  What do we value and how?  Do we value the potential energy in streams using money? Nature provides products and services for “free” Money is NOT paid for those services Only for the work of the farmer who uses that energy to spread water on his crops

4. Money as Value  The price of something is determined by: Scarcity Human inputs Perception  It does not (nor perhaps should it) reflect the work of the environment

5. Money as Value  Real wealth in an economy is not money  Real wealth is:  Food, shelter, clothing, fuels, minerals, forests, fisheries, land, buildings, art, music, information, etc.

6. Money as Value  The ‘buying power’ of money (is your currency ‘strong’ or not) depends on the amount of real wealth there is in an economy  More real wealth, more buying power

7. Emergy Ecological Economics  Some key words: Emergy Transformity Specific Emergy Empower Empower Density Maximum Empower

8. Emergy Ecological Economics  Energy…  The ability to cause work  Since all energy can be converted 100% to heat, it is convenient to express energy in heat units…btu’s calories, joules

9. Emergy Ecological Economics There are many “forms” of energy…. Sunlight… Wind… Geopotential energy of elevated water… Fuel… Electricity… Information...

10. Emergy Ecological Economics Not all forms of energy are equivalent...  sunlight ≠ wind ≠ fuels ≠ electricity While they can all be converted to heat…one cannot say that joules of one form of energy are equal to joules of another They differ in the work that went into making them, and in their ability to cause work...

11. Energy Quality  Different energies are different in ‘Quality’  Energy Quality is related to… Concentration Flexibility Ease of transportation Convertibility Oil is highly concentrated in the ground, it is flexible in its many uses, it is easy to transport by pipeline or ship, and it can be converted into many forms of work

12. Energy Quality  And these are related to the work that was needed to make the energy object  Objects to the right in a hierarchy required all the work to the left of it  That work concentrated the original ‘sources’ of sunlight, deep heat, and lunar gravity …highest ‘quality’ objects It took all of this, to get the… Original ‘sources’

13. Energy Quality  ‘Information’ is the highest quality energy in human society  The concept of quality required a new concept of energy, it required ‘emergy’

14. Emergy  Emergy: the energy that it took to make any other form of energy, good, or service Sometimes thought of as…. ENERGY MEMORY  EMPOWER = the flow of emergy per time  EMPOWER DENSITY = empower per area

15. Emergy EMERGY EMERGY - The energy (of one form) required directly and indirectly to make something

16. Emergy  Units of EMERGY... Solar emergy joules… or Solar emjoules… or “sej”

17. Hierarchy  All systems are organized as hierarchies…  Many small components and fewer and fewer larger components

18. Hierarchy Food chain…with each successive energy transformation, there is less energy, but of a higher quality

19. Hierarchy  The 20th century energy food chain of techno- humans…

20. Measuring ‘Quality’  In a hierarchy there are outputs from each interaction of emergy flows  The more emergy that it takes to make something (per unit of output), the higher the quality of the output  As we move to the right in a hierarchy, the interactions are more intense and the output quality is higher More intense, Higher quality

21. Measuring ‘Quality’  The amount of emergy required to produce a mass (1 gram) or energy (1 Joule) is an indication of its quality  If the output is emergy/Joule it is called Transformity Written Sej/J  If the output is emergy/gram it is called Specific Emergy Written Sej/g  We also use Sej/$ Output = Joules or grams

22. Measuring ‘Quality’  A transformity or specific emergy value for a product allows us to locate the product in an energy transformation hierarchy

23. Typical Solar Transformities B. Review of concepts and definitions... Measuring ‘Quality’

24. Emergy in a Country  What can money buy in a country?  That depends on the real wealth production of the environmental processes on the left  And they get their emergy from the Earth inputs (sun, tide, deep heat) Money Real-wealth production Earth inputs

25. Emergy in a Country  The real wealth product is sold to pay for the goods and services of processing  No money is paid to the environment that did the work of production Economic product sold here Goods and services of processing

26. Emergy in a Country  The ‘buying power’ of the money in your economy is measured by dividing the total emergy use in the economy by the gross domestic product (GDP) of the economy  Called the emergy/money ratio Money Real-wealth production Earth inputs

27. Emergy in a Country  Divide total emergy use by gross domestic product (GDP) Emergy/Money Ratio… USA

28. Total Emergy Use Gross Domestic Product = 1.0 E12 sej/dollar So... Every dollar spent in US economy has “embodied” in it, 1 E 12 sej of emergy A. Emergy Concepts and Principles… Emergy in a Country

29.  Sometimes economies add money by lending or by printing more money  If more money is circulated for the same emergy then this causes inflation, and the emergy/money ratio becomes smaller Emergy/Money Ratio… USA

30. Emergy in a Country  Market values are poor measures of real wealth  Market prices are effected by scarcity  When environmental resources are abundant then prices are low  But this is when the net contribution of real wealth to the economy is greatest and living standards are highest Living standards high Optimism of 1950s

31. Emergy in a Country  Market values are poor measures of real wealth  When resources are scarce the market puts a higher ‘value’ on the product (higher price)  But with less resource there is a lower net contribution of real wealth to the economy  Market values are inverse to real wealth contributions

32. Emergy in a Country  There are better ways to judge the contribution of a flow or process to an economy  Emergy indices give valuable information

33. Emergy in a Country IndexHow Calculate What is it for? EYR – Emergy Yield Ratio (Net Emergy) Y/FCan the product drive other processes or even the whole economy (use for fuel comparisons) – does it have a “net emergy”? ELR – Environmental Loading Ratio (F+N)/RHow much pull or pressure is there on matching renewable resources? (from the point of view of environmentalists) Empower DensityU/AreaAnother measure of development intensity (like ELR). This is total emergy flow, divided by area—therefore, the “density” of emergy flow % RenewR/(R+N+F)How sustainable is a process? High percent means more sustainable in the long run, when non-renewables are depleted EIR – Emergy Investment Ratio F/(R+N)How much had to be “invested” from the bigger scale to attract (capture) the environmental resources? (from the point of view of economic developers) Emergy per PersonU/PersonThis is a measure of personal wellbeing. Higher emergy per person means the person is receiving a greater flow of real wealth, or is able to do real work. Emergy Indices

34. Emergy in a Country  The net emergy yield ratio (EYR) compares the output against the input  You must have a net output greater than 1  The EYR indicates the net contribution of a process to the economy beyond its own operation

35. Emergy in a Country  The emergy yield ratio, also called net emergy yield, is very valuable for evaluating and comparing fuel sources  Fuel sources must support the rest of the economy and so their net yields must be high (4-10)  Fuels are a stimulus to the entire economy

36. Emergy in a Country  We looked before at the sales of an environmental product  Now lets follow the product as it is processed into some high-tech good, or into information  As raw materials are processed and transformed and transformed again, new inputs and new money is added Sales of environmental products

37. Emergy in a Country  Eventually those raw inputs might be used in high-tech or information centers, located in the centers of cities  Those new goods have high transformities  The convergence of goods occurs within a convergence of space  Living in city centers therefore requires more money

38. Emergy in International Trade  The general energy hierarchy found in all of nature and in the economies of humanity is observed in the relationships between nations  Some are rural, and some are mainly urban  Highly developed urban countries are centers in the global hierarchy  Rural areas converge raw resources to towns and receive goods and services in return  Small towns contribute to and receive from cities, and these to and from larger cities, and so on Goods and services Raw resources

39. Emergy in International Trade  Generally, a country looses wealth if it sells environmental raw products  This is because the emergy of nature’s work to make those environmental products is high, whereas the money received is only for some services to process them Money paid only for services Nature’s work

40. Emergy in International Trade More emergy per dollar paid Less emergy Urban Rural  For finished, high-tech, manufactured products the prices are high, so the emergy of the money paid is closer to the emergy of the products sold  In general, developed nations tend to receive more emergy than they give in exchange

41. Emergy in International Trade  In 1985 the buying power of the US (2x10 12 sej/$) dollar was four times that in rural resource countries (8x10 12 sej/$) USA receives 4 times more emergy Japan receives 4 times more emergy Japan receives 16 times more emergy

42. Emergy in International Trade  Benefit to developed country: 1. (Within country) the emergy of environmental products is higher than that in the money paid for the processing services 2. (Between countries) the emergy/money ratio in rural countries is higher than the ratio in the urban country 1) Emergy of environmental products is higher than emergy in money paid 2) Emergy / money ratio is higher in rural country, lower in urban country (Rural)(Urban) More emergy

43. Emergy in International Trade  When emergy trade is unbalanced, the difference can be made up in education, military, or technology transfers, evaluated for their emergy contributions  This balances exchange while still allowing countries to be at different levels in the urban-rural hierarchy

44. Maximum Empower  During the self- organization process, systems develop structure that maximizes useful empower transformations  Not simply maximizing intake, but maximizing best use of emergy  Processes in a system are useful if they reinforce intake, and at the optimum efficiency

45. Systems maximize empower by: 1) developing storages of high-quality energy, 2) feeding back work from storages to increase inflows, 3) recycling materials as needed, 4) organizing control mechanisms that keep the system adapted and stable, 5) setting up exchanges for needed materials, 6) Contributing work to the next larger system Maximum Empower