Going beyond energy accounting for sustainability: Energy, fund elements and the economic process

Energy 37 (2012) 18e26

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Going beyond energy accounting for sustainability: Energy, fund elements and the economic process Kozo Mayumi a, *, Hiroki Tanikawa b a b

The University of Tokushima, Minami-Josanjima 1-1, Tokushima 770-8502, Japan Graduate School of Environmental Studies, Nagoya University, Furo-cho, Chikusa-ku, Nagoya 464-8603, Japan

a r t i c l e i n f o

a b s t r a c t

Article history: Received 28 January 2011 Received in revised form 18 April 2011 Accepted 29 April 2011 Available online 8 June 2011

The main purpose of this paper is to examine to what extent the widely used energy accounting schemes are useful for dealing with sustainability issues in view of Georgescu-Roegen’s production process and its implications for the evolutionary aspects of the economic process. The first part critically examines the concept of “net energy” in relation to material elements produced and consumed in the economic process in light of Georgescu-Roegen’s bioeconomics. The first part also considers the issue of what is produced in the economic process and emphasizes the importance of matter in bulk. The second part first compares the theoretical basis of embodied energy analysis (EEA) from the point of view of Piero Sraffa, a point of view not examined by Georgescu-Roegen. The second part also examines EEA critically in terms of Georgescu-Roegen’s flow-fund model and compares Sraffa’s analysis and Georgescu-Roegen’s flow-fund model. Ó 2011 Elsevier Ltd. All rights reserved.

Keywords: Fund Georgescu-Roegen Sraffa Embodied energy Net energy Joint production

1. Introduction Developing countries in Asia are projected to have an annual economic growth rate of 5.4% from 2004 to 2030 shown in Fig. 1. According to Kokichi Ito’s “guestimate” for 2030, primary energy demand of Asia reaches at the level that is twice (6.2 billion toe) as much as the year 2004 level (3.1 billion toe), reflecting on expected high economic growth rate (Ito [1]). The projected energy demand from Asia would be almost 40% of the total energy demand in the world by 2030. According to Luft [2], 58% of China’s oil imports comes from the Middle East now and this share will grow to 70% by 2015. China’s concern for its growing dependence on oil imports has led to its active involvement in exploration and production in places like Kazakhstan, Russia, Venezuela, Sudan, West Africa, Iran, Saudi Arabia and Canada. But China is not the only actor thirsty for oil in Asia, other countries including India, are projected to be major contributors to the world’s energy demand. In fact, China and India are estimated to account for approximately 70% of the energy consumption in Asia over this 26 year time period [1]. How about the supply side of energy? To date, for example, oil is the source of energy carriers (ECs) and other materials for nearly all the products that we consume. However, if the twilight of oil, vividly described * Corresponding author. Fax: þ81 88656 7298. E-mail address: [email protected] (K. Mayumi). 0360-5442/$ e see front matter Ó 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.energy.2011.04.050

by M. Simmons [3], is really approaching in Saudi Arabia and the Middle East, oil producers in the Middle East will no longer be able to supply as much as the world will need, then we should start considering an alternative energy scenario to the conventional petroleum-based scenario. According to Colin J. Campbell’s “gustimate” shown in Fig. 2 [4], the future of oil and gas production profile is not promising at all compared with the projected demand increase in energy. The projected gap between energy demand and supply should be a serious concern for many people. However, despite the tremendous importance of energy for all economic activities, material elements including various mineral resources are also indispensable to the economic process. However, the familiar bias in favor of energy seems to have been accentuated since the oil embargo in 1973 and continues to have survived because of people’s concern for peak oil and climate change. Nicholas Georgescu-Roegen was unique in this respect: matter matters, too [5,6]. Georgescu-Roegen’s concern is important because matter in bulk and energy is not convertible into each other. Therefore, there is no a priori criteria by which we can judge which equivalent recycling technology, one with more energy and less matter in bulk, or one with less energy and more matter in bulk, is ecologically preferable. Herbert F. Bormann [7] and Preston Cloud [8], two contemporaries of Georgescu-Roegen, strongly supported his idea of ecological salvation, arguing that if the current rates of

K. Mayumi, H. Tanikawa / Energy 37 (2012) 18e26

19

Fig. 1. World Primary Regional Energy Demand (provided by K. Ito).

consumption of useful metals continue, about half of the known reserves might be exhausted by 2050. In fact, mineral resources, and particularly the geologically scarce metals, have been becoming increasingly important. By the geologically scarce metals we mean those metals with crustal abundances below 0.1 percent (Skinner [9]). It is surprising to see that such common metals as copper, lead, zinc and nickel, all of which have large and growing rates of production, belong to this category. ‘Most experts believe that it is in this group of metals that shortages are likely to develop first and that these are apt to pose a serious challenge to technological development’ [9:94]. Cloud’s caution that by the year 2050 several important scarce metals (e.g., molybdenum, nickel copper and silver) would be in serious shortage is a fundamental technological challenge. In fact, silver and gold production already fall short of present demand, and stockpiles and savings from past mining are being drawn upon. In 2005, for example, world silver production amounted to 20,200 ton while world silver consumption reached 28,364 ton (US Geological Survey [10]). The main purpose of this paper is to examine to what extent the widely used energy accounting schemes (net energy or embodied energy) are useful for dealing with sustainability issues in view of Georgescu-Roegen’s production process and its implications for the evolutionary aspects of the economic process [11]. Section 2

Fig. 2. Oil and gas production profiles 2009 base case (provided by Colin J. Campbell).

critically examines the concept of “net energy” in relation to material elements produced in the economic process in light of GeorgescuRoegen’s bioeconomics. Section 2 also considers the issue of what is produced in the economic process and emphasizes the importance of matter in bulk. Section 3 first compares the theoretical basis of embodied energy analysis (EEA) from the point of view of Piero Sraffa (SA), a point of view not examined by Georgescu-Roegen. Section 3 then examines EEA critically in terms of GeorgescuRoegen’s flow-fund model and compares SA and GeorgescuRoegen’s flow-fund model. Here, flows are ‘materials’ qualitatively transformed into a process. They are elements that enter but do not come out of the process or elements that come out of the process without having entered. Funds are agents transforming a given set of inflows into a given set of outflows. They are the elements that enter and leave the process unchanged: capital, human labour, and Ricardian land. The conclusion follows Section 3. 2. Epistemological conundrum of energy equivalent of products: what is produced in the economic process? 2.1. Net energy and energy equivalent of products: a conundrum In thermodynamics we are told that various energy forms can be transformed into each other under appropriate conditions and measured in a common unit. Yet, in the economic process, it is absolutely necessary to distinguish at least five different energy forms shown in Fig. 3: (i) energy in situ; (ii) primary energy sources (PESs); (iii) ECs; (iv) end use energy; and (v) dissipated energy (DE). Each of the four transformations exemplified in Fig. 3 produces a different type of “net energy” form. However, what is the net energy? It is useful to examine this issue by using GeorgescuRoegen’s flow-fund model shown in Table 1. Table 1 considers an aggregated economic process. We adopt the view that for practical purposes with sufficient supply of energy it is possible to recycle all material elements used in the economic process. To avoid irrelevant side issues following Georgescu-Roegen [12] we have reduced the whole process to the consolidated sectors and aggregated categories pertinent to our argument: P1: transforms primary energy source into EC (as shown in the second transformation of Fig. 3); P2: produces maintenance capital goods MK; P3: produces consumer goods C; P4: recycles waste matter W into recycled matter (RM); P5: maintains population H.

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K. Mayumi, H. Tanikawa / Energy 37 (2012) 18e26

Fig. 3. Energy transformation of five energy forms based on “flow complex”.

It is reasonable to assume that the energetic dogma does not deny the requirement of maintenance capital MK. Every process of the matrix of Table 1 ultimately produces DE. What is the net energy in Table 1? A good candidate is x11, since EC (one type of net energy) is produced in P1 from PES. Unfortunately, x11 cannot be accepted as a net EC gain from e1. Since x21 of MK is used in P1, a certain amount of EC is required to produce x21 of MK. So, we have to obtain the EC equivalent of x21 of MK and deduct this amount from x11. Then what is the EC equivalent of x21? Of course the answer cannot be obtained, since to produce MK we have to use x42 of RM! So, we have to look for the energy equivalent of RM. We can never get out of this logical impasse, since every type of the EC equivalent in the whole economic process must be obtained. In addition to this formidable task, there are two additional difficulties to be discussed in Section 2.2 and Section 3.1: the real production of the economic process and joint production. 2.2 What is produced in the economic process?: material elements matter Gross national product (GNP) indicates the added value for a particular country produced in a year. It is natural for economists Table 1 Aggregated economic process based on energetic dogma (adopted with a few changes from Georgescu-Roegen 1979, Table I). Elements

P1

P2

P3

P4

P5

Flow coordinates EC MK C RM PES W DE

x11 x21 * * e1 W1 d1

x12 x22 * x42 * W2 d2

x13 x23 x33 x43 * W3 d3

x14 x24 * x44 * W4 d4

x15 x25 x35 * * W5 d5

Fund coordinates Capital Human labour Ricardian land

K1 H1 L1

K2 H2 L2

K3 H3 L3

K4 H4 L4

K5 H5 L5

as well as laypersons to think that the economic process produces goods and services that are the real output of the economic process. However, Georgescu-Roegen noticed a serious analytical and conceptual fallacy within the neoclassical treatment for the development process: “It is high time, I believe, for us to recognize that the essence of development consists of the organizational and flexible power to create new processes rather than the power to produce commodities by materially crystallized plants” [11: 275]. This power is termed as a P-sector by Georgescu-Roegen [11]: “an economy can “take off” when and only when it has succeeded in developing a P-sector”. This issue of a P-sector is related to the issue of what is produced in the economic process. Some of those studying the functioning of socioeconomic processes seem to be confused by what is produced by the economic process. According to Georgescu-Roegen the economic process does not produce goods and services, but it produces a reproducible system, via the establishment of an integrated process of production and consumption of goods and services. When dealing with the analysis of the economic sectors e those producing added value e they not only produce goods and services, but also produce those processes required to produce and consume goods and services. When considering the whole socioeconomic system, it is the integrated action of the productive economic sector and the sector of final consumption which has to be considered. Using GeorgescuRoegen’s terminology, the economic process has the goal of reproducing and expanding the various fund elements defined simultaneously across different levels and scales, by using disposable flows. Following Georgescu-Roegen, we can conclude that an economy not only produces goods and services, but more importantly produces the processes required for producing and consuming goods and services. The readers unconvinced of our argument are advised to look at Fig. 4. In particular a new type of PES is successfully introduced into the economic process, the whole fund elements of old types are replaced completely to adapt that new type of PES. Georgescu-Roegen [13: 251] reports that: “commodities are not produced by commodities, but by processes. Only in a stationary state is it possible for production to be confined

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21

Fig. 4. Energy, capital and society.

to commodities. Georgescu-Roegen [13: 252] maintains that “it is this P-sector [process production] .that constitutes the fountainhead of the growth and further growth.” We can find an analogy of production and consumption in terms of metabolic patterns within the ecological theory. In his analysis of ecosystem structure, Ulanowicz [14] finds that the network of matter and energy flows making up an ecosystem can be divided in two parts. One part that generates a hypercycle and the other part that has a purely dissipative nature. The former part is a net energy producer for the rest of the system. The hypercyclic part is required to keep the dissipative system in a situation of non-equilibrium (Eigen [15]). Since some dissipation is always “necessary to build and maintain structures at the sub-compartment level” [14: 119], the net energy producing part comprises activities that generate a positive feedback by taking advantage of sources of free energy outside the system (e.g. solar energy). The role of the hypercyclic part is to drive and keep the whole system away from thermodynamic equilibrium. The latter part comprises activities that are net energy degraders. However, this dissipative part is not useless for the system. It has the role of providing control over the entire process of energy degradation and stabilizing the whole system. An ecosystem made of a hypercyclic part alone cannot be stable in time. Without the stabilizing effect of the dissipative part, a positive feedback “will be reflected upon itself without attenuation, and eventually the upward spiral will exceed any conceivable bounds” [14: 57]. Therefore, a subtle balance between the hypercycle part and the dissipative part is essential for reproducing the stable ecosystem network. So when the ecosystem is stable, the overall metabolic balance indicates that the various elements are produced and consumed over the food chain of the network at an expected pace: herbivores eat plants, tigers eat herbivores and when tigers die, their bodies are ‘consumed’ by other living creatures in order to close the nutrient cycles. In analogous terms, therefore, a hypercycle part is compared to production of production process, and a dissipative part is compared to production of consumption process. As Georgescu-Roegen correctly stated, the economic process produces the processes required for producing and consuming

goods and services. A huge amount of material elements are absolutely necessary to maintain and expand these processes. For this reason, Georgescu-Roegen emphatically objected to the equivalence of energy and matter in bulk, paying proper attention to a peculiar attribute of the modern economic process in the agricultural process: as “far as the economic process itself is concerned, we must not ignore the substantial dissipation of matter caused not by purely natural phenomena but by some activities of living creatures, of mankind’s, above all. It is the dissipation of some vital elements by man’s consumption of food and timber in places far away from the farm and the forest that produced those items” [12: 1040]. In thermodynamics the entropy law refers only to available energy dissipation tendency, not available material dissipation. However, Georgescu-Roegen correctly indicates that modern agriculture tends to destroy harmonious material circulation mechanism. His view is shared with the great agronomist, Justus von Liebig. Liebig emphasized the importance of material circulation in the agricultural fields. The principle of his agronomy consists in his view that the circulation of matter in the agricultural fields must be maintained with manure as far as agricultural products are consumed in cities, and fundamental elements of soils are never returned back [16]. However, it should be noted that the dissipation of materials without properly recycling them could be a serious problem indicated by Cloud [8] in the case of mineral resources. This concern also applies to the case of the construction materials in Japan. Figs. 5 and 6 [17] show a set of estimated amounts of construction material waste. Please note that a lot of construction materials are not included in the available statistical data, since these materials for construction are remained in the original construction site without being taken out from that site. It seems to appear that a lot of room exists for transforming construction mineral waste into raw materials for new construction. For example, technologically speaking, cement and coarse aggregate could be separated from part of this construction mineral waste. Unfortunately, this recovering technology is neither cost effective nor authorized under the

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K. Mayumi, H. Tanikawa / Energy 37 (2012) 18e26

present law system in Japan. Unless these two aspects are improved dramatically, recycling demand of construction material waste would be confined to materials for new construction of highways or roads. So, future demand of various material elements must increase with the future demand increase in energy. Therefore, detailed study on critical mineral resources is absolutely necessary for sustainability issues. In this respect Georgescu-Roegen’s concern with matter in bulk cannot be ignored.

3. EEA, Sraffa’s analysis and the flow-fund model 3.1. Embodied analysis and Sraffa’s analysis: non-joint production case We compare the theoretical basis of EEA from the point of view of Piero Sraffa (SA). One system of equations in SA [18: 11] does not consider joint production,

b ð1 þ rÞAt p þ PH H ¼ Ap

Fig. 5. Estimated and statistical amounts of construction materials waste.

(1)

p ¼ (p1,p2,.,pn): the value vector of commodities (t denote the transpose) and p is determined together with the wage PH and the rate of profit r; A: a matrix and element Aij is the quantity of commodity i used in the process j (i or j ¼ 1,2,.n); b a diagonal matrix and elements A1, A2, ., An form the diagA: onal where Ai is the total quantity of commodity i (i ¼ 1,2,.n) annually produced; H: a vector and element Hj is the fraction of the total annual P labour of society employed in the process j ( nj¼ 1 Hj ¼ 1). Sraffa assumes that the system of Eq. (1) is in a self-replacing state, so the following inequality should hold true:

A1j þ A2j þ . þ Anj  Aj ðj ¼ 1; 2; .; nÞ:

(2)

Sraffa first examines the case in which r ¼ 0 and PH ¼ 1,

b At p þ H ¼ Ap:

(3)

The system of Eqs. (3) is the same as that used in EEA for static analysis [19e21].

be Xt e þ E ¼ X

Fig. 6. Waste materials to be taken from construction site.

(4)

X: a matrix and element Xij is input of commodity i to the process j; b : a diagonal matrix and elements Xj form the diagonal; X E: a vector and element Ej is the external direct energy input to sector j; e: a vector and element ej is the embodied energy intensity per unit of Xj. It is important to discuss formal similarity between EEA and SA without joint production because the roles played in economic process by labour input and by energy input are the same in both analyses. According to IFIAS (cited in Ref. [21]), EEA is the process of determining energy required directly and indirectly to allow a system (usually an economic system) to produce commodities. EEA claims that “with the appropriate perspective and boundaries, market-determined dollar values and embodied energy values are proportional” [19: 1224]. In SA without joint production, relative commodity values and labour cost have the same proportional relationship: “the relative values of commodities are in proportion to their labour cost, that is to say to the quantity of labour which directly and indirectly has gone to produce them” [18: 12]. At first sight, EEA and SA without joint production seem to agree on the role played by net energy input in EEA and by labour in SA because

K. Mayumi, H. Tanikawa / Energy 37 (2012) 18e26

each unit of external energy input has the same embodied energy intensity in EEA and each unit of labour input receives the same wage in SA. However, the two analyses have entirely different aspects of the role played by energy and labour. Except when r ¼ 0 and PH ¼ 1, proportionality of commodity values to labour cost does not hold. The case of r ¼ 0 and PH ¼ 1 is a preliminary step for Sraffa to set up the concept of the Standard Commodity and the Standard System. The Standard Commodity is a composite commodity in which various commodities are represented among its aggregate means of production in the same proportions as various commodities among its products. The Standard System consists of a set of equations which produce the Standard Commodity. Sraffa clearly states that “in the Standard system the ratio of the net product to the means of production would remain the same whatever variations occurred in the division of the net product between wages and profits and whatever the consequent price changes” [18: 21]. In EEA, energy is the only net input to the economic system, but it is unclear whether or not Sraffa treats labour as net input to the system. However, Sraffa recognizes two different characteristics of labour: (i) wages consisting of necessary subsistence of workers as basic product defined by Sraffa (a commodity enters into the production of all commodities); (ii) a share of the surplus product. Sraffa treats labour only as a share of the surplus product and follows the traditional wage concept, despite noticing drawbacks of this procedure [18: 10]. Georgescu-Roegen’s flow-fund approach tries to evade Sraffa’s dual nature of labour by establishing an economic sector which maintains all labour power in which subsistence character of labour is treated.

3.2. EEA and Sraffa’s analysis: joint-production case The circular nature of joint production causes theoretical treatments of joint production to be complicated. Both EEA and SA face two central epistemological issues when investigating the case of joint production shown in Fig. 7: (i) since each commodity is produced by several processes, if commodity G enters only one of two different processes and commodity G is produced in these two processes at the same time, it is difficult or impossible to be sure whether or not commodity G enters directly into the production process; (ii) if commodity D is produced by two different processes and different commodity G enters one of these two processes as a means of production, it is difficult or impossible to be sure whether or not different commodity G enters indirectly into the production process. In the case of joint production, there is no operational meaning of “direct” or “indirect.” EEA further complicates issues because energy and material flows in ecosystems are measured in different physical units. To examine the issue of dimension in EEA, the following equations apply to the case of joint production [22,20],

q ¼ Ui þ w;

(5)

q ¼ Vt i;

(6)

and

g ¼ Vi

(7)

q ¼ commodity output vector; g ¼ process output vector; w ¼ net system output vector; i ¼ vector of 1’s; U ¼ use matrix (commodity  process) giving use of commodities by the processes; V ¼ make matrix (process  commodity) giving production of commodities by the processes. Rewriting Eq. (5),

b q ¼ Ug

1

b g i þ w;

(8)

b g : a diagonal matrix with elements of g as the diagonal. Substituting from Eq. (7),

b q ¼ Ug

1

Vi þ w

(9)

and rewriting,

b q ¼ Ug

1

b Vq

1

Defining U b g

bi þ w q

1

(10)

¼ F and V b q

1

¼ D, gives

q ¼ FDq þ w:

(11)

For simplicity, the issue of dimension is explained in terms of a system of 3 commodities and 2 processes. D1, D2, and D3 in matrices indicate dimension (not strictly physical dimension). Number 1 in matrices indicates no dimension.

1 D1 D2 A; D3

0

D1 U ¼ @ D2 D3  V ¼

(12)

 D3 ; D3

D2 D2

D1 D1

(13)

and

1 D1 @ q ¼ Ui þ w ¼ V i ¼ D2 A: D3 0

t

(14)

To transform g into dimensionless quantity, the following path is adopted,

 g ¼ Vi ¼

D1 D1

0

b Ug

1

b Vq

1

 ¼ 

D1 D1 1 1

D2 D2

1 0    D1 1 D3 @ 11 A ¼ ; D2 1 D3 1 D3

1 D1  1 D2 A 0 D3

D1 ¼ @ D2 D3

¼ Fig. 7. Epistemological difficulty of joint production.

23



0

D1 ¼ @ D2 D3

0  D1 D3 @ 1 0 D3 0  1 : 1

D2 D2 1 1

0 1

0 D1 2 0

1 D1 D2 A ¼ F; D3

(15)

(16)

1 0 0 A ¼ D D1 3 (17)

24

K. Mayumi, H. Tanikawa / Energy 37 (2012) 18e26 Table 2 Actual aggregated economic process (adopted with a few changes from GeorgescuRoegen 1979, Table II).

Forming FDq

0

D1 FDq ¼ @ D2 D3

D1 D2 D3

10 1 0 2 1 D1 þ D1 D2 þ D1 D3 D1 D1 D2 A@ D2 A ¼ @ D2 D1 þ D22 þ D2 D3 A D3 D3 D3 D2 þ D3 D2 þ D23 (18)

Dimensions in Eq. (11) are not consistent with dimensions in Eqs. (14) and (18), making untenable the claim: “it is indirectly applicable by assuming a set of weights to allow the formation of g and then investigating the properties of these weights” [22: 395]. Sraffa’s aim of introducing the case of joint production provides the major difference between EEA and SA. Sraffa describes [18 Chapter VIII] the case of two products jointly produced by two different methods, implying that the same machine at different ages should be treated as being different products with different prices. Thus, the partly worn-out, older machine emerging from the production process may be regarded as a joint product with the year’s output of a commodity. It is important to consider the concept of non-basic and basic commodities. In a system of n productive processes and n commodities (whether or not produced jointly) a group of m (1  m < n) linked commodities are non-basics if the rank of matrix of n rows and 2m columns is less than or equal to m [18: 51]. All other commodities are basics. A system of equations of production system can be transformed into a system of equations without non-basic commodities. This transformation produces a set of positive and negative multipliers which, when applied to the original n equations, allows reduction of the original equations to a smaller number of equations equal in number to basic products. This new system of equations is called the Basic equations. In each of the smaller number of equations, quantity of a non-basic is cancelled by an equal quantity of opposite sign, so only basics are included. Sraffa introduces the Basic equations to show that the relation between relative values of basic commodities and the rate of profit is independent of relation between relative values of non-basic commodities (if any) and the rate of profit. A system of equations similar to the Basic equations in SA may contain negative quantities as well as positive quantities. This is a logical problem, but not a problem of insufficient data as claimed by some energy analysts who insist that “such negative values are mainly a result of flaws in the original data acquisition and aggregation and can be eliminated by judicious further aggregation, or by better data” ([22: 397], the same view is found in [20: 99]). 3.3. EEA, Sraffa’s analysis and the flow-fund model: a critical comparison

P0

P1

P2

P3

P4

P5

x00 x10 x20 * * * M0 W0 s0 d0 r0

* x11 x21 * * e1 * W1 s1 d1 r1

x02 x12 x22 * x42 * * W2 s2 d2 r2

x03 x13 x23 x33 x43 * * W3 s3 d3 r3

x04 x14 x24 * x44 * * W4 s4 d4 r4

* x15 x25 x35 * * * W5 s5 d5 r5

Fund coordinates Capital Human labour Ricardian land

K0 H0 L0

K1 H1 L1

K2 H2 L2

K3 H3 L3

K4 H4 L4

K5 H5 L5

and

0

x00 B x10 B Yt ¼ B B x20 @ * *

(19)

* x11 x21 * *

x02 x12 x22 * x42

x03 x13 x23 x33 x43

1 x04 x14 C C x24 C C: * A x44

(20)

Y: transposed matrix of the first five rows and five columns of Table 2; f: column vector of gross energy equivalents (f0, f1, f2, f3, f4); e: column vector (0,e1,0,0,0); H: column vector (H0,H1,H2,H3,H4). In a static perspective, there must normally be one monetary equality

Total Receipts ¼ Total Cost:

(21)

Total cost equals cost of input flows plus payments for fund service. So,

Bi ¼ PH Hi þ PK Ki þ PL Li ði ¼ 0; 1; 2; 3; 4Þ;

(22)

B: column vector (B0,B1,B2,B3,B4); p: column vector of prices (p0,p1,p2,p3,p4) of physical commodities produced by processes (Pi). The system that prices must always satisfy independently of other constraint is

Yp ¼ Re þ B;

Table 2 considers aggregated economic process: P0: transforms matter in situ MS into controlled matter CM; P1: transforms PES into EC; P2: produces maintenance capital goods K; P3: produces consumer goods C; P4: recycles garbojunk GJ into RM; P5: maintains population H. DM is dissipated matter and DE is dissipated energy. Refuse RF consists in part of available matter and available energy, but RF is in a form not potentially useful to people at present. Georgescu-Roegen’s critique of EEA considers double counting of labour. Assuming energy equivalent of labour service eL, these equations follow:

Yf  eL H ¼ e

Elements Flow coordinates CM EC MK C RM PES MS GJ DM DE RF

(23)

R: price of PES corresponding to conventional royalty income. If embodied energies are proportional to prices, the factor of proportionality must be R, so

pi ¼ Rf i :

(24)

Combining equations Yf  eLH ¼ e (19), Yp ¼ Re þ B (23) and pi ¼ Rfi (24) produces an absurd result

ReL H ¼ B:

(25)

Thus, eL should be deleted to avoid double counting of labour. Equation Yf  eLH ¼ e (19) should be replaced by

Yf ¼ e:

(26)

Combining equations Yp ¼ Re þ B (23), pi ¼ Rfi (24) and Yf ¼ e (26) produces

K. Mayumi, H. Tanikawa / Energy 37 (2012) 18e26

B ¼ 0:

(27)

Equation B ¼ 0 (27) is absurd, based on the flow complex of EEA without fund element. Flow complex B ¼ 0 is similar to that adopted by a net energy analysist who mistakenly follows the flow complex of neoclassical economists [23]. B must be a strictly positive vector in any economic system, even in a socialist system which includes at least some wages and interest. Georgescu-Roegen never compares his approach with Sraffa’s approach, but such comparison is worthwhile because recent research (e.g. [24]) in sustainability issues indicates possible applicability of SA to sustainability issues. First of all, Sraffa and Georgescu-Roegen have decidedly different views about the economic process. Sraffa does not consider the creation of the production process. Sraffa claims that his investigations are “concerned exclusively with such properties of an economic system as do not depend on changes in the scale of production or in the proportions of factors” [18: v]. On the other hand, as already discussed in Section 2.2, the economic process not only produces goods and services, but much more importantly produces the processes required for producing and consuming goods and services. Sraffa considers depreciation of capital fund in order to preserve the same efficiency of capital for reproduction of the process. But SA is essentially a static analysis. Georgescu-Roegen considers the case of stationary process in which fund element is intact. Of course Georgescu-Roegen recognizes the invalidity of this assumption in the long-term because of the entropy law: “[a] process by which something would remain indefinitely outside the influence of the Entropy Law is factually absurd. But the merits of the fiction are beyond question” [11: 229]. Sraffa treats mineral resources and land as non-basic commodities which are not included in the Standard System and having marginal importance. Georgescu-Roegen’s approach holds mineral resources to be vital elements for the survival of human beings. Georgescu-Roegen sees a fundamental difference between flow and fund element in the economic process because p2 is not equal to PK. p2 is the price of various maintenance items and PK is the price proper (e.g. renting an automobile). If the rate of profit r ¼ 0, approaches of both Sraffa and Georgescu-Roegen are identical in a stationary state. The following equation obtained by Sraffa [18: 66] for the case of capital illustrates the point.

Mp

rð1 þ rÞn þ ðC1 p1 þ . þ Ck pk Þð1 þ rÞ þ PH Hg ¼ Gg pg ; ð1 þ rÞn 1 (28)

M: the number of machines of a give type to produce Gg of a commodity. If r approaches zero, the following equation holds.

Mp þ ðC1 p1 þ . þ Ck pk Þ þ PH Hg ¼ Gg pg n

(29)

C1p1 þ . þ Ckpk: flow cost; Mp/n: fund cost; Ggpg: total receipts. Eq. (29) is essentially the same as Georgescu-Roegen’s for reproduction system: total receipts are equal to total cost that consists of flow cost and fund cost.

4. Conclusion As shown in this paper the importance of material elements (particularly, capital equipment for the infrastructure) for the

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economic process have been undervalued both by energy analysis and economic analysis. This situation is unfortunately reflected within the framework of EEA that adopts the essence of Sraffa’s analysis without recognizing serious analytical problems. In fact, the title of his book tells us all: Production of Commodities By Means of Commodities [18]. However, this omission is easily understood. How to deal with capital, one of the three fund elements, is the most intriguing but formidable subject in economic science. Is there any way to get out of this impasse without directly deal with capital issues? Before providing a possible way out by which we can indirectly and effectively tackle capital issues, it is useful to reconsider what happened within the “Western” socioeconomic systems after 19th century? At least the following eight changes should be noticed, in our view: 1. Large scale energy use based on fossil fuels and tremendous increase in productivity (“high power level” in the broadest sense of the word); 2. Establishing global transportation network (motive power society); 3. The structural changes in population and industries towards an inverted triangle; 4. “Land use” pattern change; 5. Growth oriented behaviors (and attitude) and their consequences that led to distribution problems; 6. The human time allocation pattern change; 7. Dramatic increase in population size (endosomatic humans) and in machines and capital equipments (exsosomatic humans); 8. Institutional changes for reinforcing seven changes mentioned above. Number 4 and Number 6 are radical changes that happened on the two other fund elements besides capital. Due to the space constraint here let us consider only human time allocation changes [11]. In the United States, for example, as late as 1850 the average working hours per week were 70. Perhaps it would be surprising to some readers of this journal to see that the first attempt to limit the child labour under 12 to a ten-hour day was made only in 1842 in Massachusetts. Furthermore, the ten-hour day did not become a widespread rule for the other workers until 1860. Since then labour hours in certain economic sectors in the United States have tremendously been reduced [25]: in 1994 human labour allocated to agriculture are only 2.66 min out of 24 h! Coal and oil (or natural gas), two types of fossil fuels, are contributions made by plants and other living creatures in vast stretches of land over several thousand million years. Thus they can guarantee the essential merits of reducing the two fund services, i.e., human time and land saving [26]. In our view this phenomena suggests that tracing allocation patterns of human time and land over time must be corresponding to capital utilization pattern changes in certain manner, so that we can avoid to directly deal with capital issues. Based on this intuition Giampietro and Mayumi have been engaged to develop an alternative scheme (Multi-Scale Integrated Analysis of Societal and Ecosystem Metabolism, MuSIASEM for short) that can study human time and land use pattern changes in relation to energy and monetary flow pattern changes by using a set of intensive and extensive variables and parameters [27e30]. One of the theoretical pillars of MuSIASEM is that the technological development of a society can be described in terms of an acceleration of energy and material consumption together with the dramatic reallocation of distribution of age classes, human time profile of activities and land use patterns in various sectors of modern economy, resulting in time and land saving in the energy and agricultural sectors. Within MuSIASEM scheme qualitative differences in energy forms are not

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K. Mayumi, H. Tanikawa / Energy 37 (2012) 18e26

addressed using thermodynamic concepts such as exergy or enthalpy. Rather, the time dimension of energy transformation in energy sector and its relation to other economic sectors is used to focus on crucial qualitative factors which the traditional biophysical and thermodynamic analysis has not dealt with sufficient attention. We believe that MuSIASEM is a possible way out to incorporate these qualitative differences in the intensity of flows into a simple scheme that can be used to analyses societal and ecosystem metabolism for sustainability issues. Acknowledgement The first version of this paper was presented by the senior author at 7th Biennial International Workshop, Advances in Energy Studies, in October 2010, Barcelona, Spain. The constructive criticisms from the audiences of that workshop are really appreciated. We are grateful to Dr. Kokichi Ito of The Institute of Energy Economics in Japan and Dr. Colin J. Campbell, Director of The Association for the Study of Peak Oil and Gas-Ireland for allowing us to reproduce Fig. 1 and Fig. 2, respectively. The following people also kindly allowed us to reproduce their pictures used in Fig. 4: (1) the picture of lantern in Edo period (Mr. K. Takahashi, the president of Takahashi Lantern Company in Kyoto; (2) the smoking chimney stackes (Mr. Ilik Saccheri); and (3) Matsumoto Castle (Ms. Y. Hori of Institute for Japanese Cultural Exchange and Experience). Without the benevolance of these great people, this paper was never published. Other pictures are taken from the public domain. We appreciate three reviewers’ helpful comments on the previous version of this paper. We would like to thank Prof. John Polimeni for his tremendous help in improving the language as well as the contents in this paper. We would like to emphasize that all responsibility for the way in which we have taken advice and criticism into the final form of this paper remains solely with us. References [1] Ito K. Setting goals and action plan for energy efficiency improvement. Paper presented at the EAS Energy Efficiency and Conservation Conference, Tokyo (19 June), 2007. [2] Luft G. Fueling the dragon: China’s race into the oil market, http://www.iags. org/china.htm; 2007. [3] Simmons MR. Twilight in the desert: the coming Saudi oil shock and the world economy. New Jersey: John Wiley and Sons; 2005. [4] Campbell CJ. Personal communication. 2011. [5] Georgescu-Roegen N. The steady state and ecological salvation: a thermodynamic analysis. BioScience 1977;27(4):266e70.

[6] Georgescu-Roegen N. Matter: a resource ignored by thermodynamicsrenewable resource economics. In: St-Pierrre LE, Brown RG, editors. Future sources of organic raw materials. New York: Pergamon Press; 1980. p. 79e87. [7] Borman FH. Unlimited growth: growing, growing, and gone? BioScience 1972; 22:706e9. [8] Cloud P. Entropy, materials, and prosperity. Geologische Rundschau 1978;66: 678e96. [9] Skinner BJ. Earth resource. 3rd ended. New Jersey: Prentice Hall; 1986. [10] US geological survey commodity statistics and information. http://minerals. usgs.gov/minerals/pubs/commodity/2005. [11] Georgescu-Roegen N. The entropy law and the economic process. Cambridge, Mass: Harvard University Press; 1971. [12] Georgescu-Roegen N. Energy analysis and economic valuation. Southern Economic Journal 1979;45:1023e58. [13] Georgescu-Roegen N. Dynamic models and economic growth. In: Energy and economic myths: institutional and analytical economic essays. New York: Pergamon Press; 1974. p. 235e53. [14] Ulanowicz RE. Growth and development: ecosystem phenomenology. New York: Springer-Verlag; 1986. [15] Eigen M. Selforganization of matter and the evolution of biological macromolecules. Naturwissenschaften 1971;58(10):465e523. [16] Liebig Jv. In: Blyth J, editor. Letters on modern agriculture. New York: John Wiley; 1859. [17] Hashimoto S, Tanikawa H, Moriguchi Y. Where will large amounts of materials accumulated within the economy go?: a material flow analysis of construction minerals for Japan. Waste Management 2007;2007(27):1725e38. [18] Sraffa P. Productions of commodities by means of commodities. Cambridge, London, UK: Cambridge University Press; 1960. [19] Costanza R. Embodied energy and economic valuation. Science 1980;210: 1219e24. [20] Costanza R, Hannon B. Dealing with the ‘mixed units’ problem in ecosystem network analysis. In: Wulft F, Field JG, Mann KH, editors. Network analysis in marine biology: methods and applications. Berlin: Springer-Verlag; 1989. p. 90e115. [21] Brown MT, Herendeen RA. Embodied energy analysis and EMERGY analysis: a comparative view. Ecological Economics 1996;19:219e35. [22] Hannon B, Costanza R, Herendeen RA. Measures of energy cost and value in ecosystems. Journal of Environmental Economics and Management 1986;13: 391e401. [23] Huettner DA. Net energy analysis: an economic assessment. Science 1976; 192:101e4. [24] England RW. Production, distribution, and environmental quality: Mr. Sraffa reinterpreted as an ecologist. KYKLOS 1986;39:230e44. [25] Giampietro M. Multi-scale integrated analysis of agro-ecosystems. Boca Raton, FL: CRC Press; 2003. [26] Mayumi K. Temporary emancipation from land: from the industrial revolution to the present time. Ecological Economics 1991;4:35e56. [27] Giampietro M, Mayumi K. A dynamic model of socioeconomic systems based on hierarchy theory and its application to sustainability. Structural Change and Economic Dynamics 1997;8(4):453e70. [28] Ramos-Martin J, Giampietro M, Mayumi K. On China’s exosomatic energy metabolism: an application of multi-scale integrated analysis of societal metabolism (MSIASM). Ecological Economics 2007;63(1):174e91. [29] Gimapietro M, Mayumi K, Ramos-Martin J. Multi-scale integrated analysis of societal and ecosystem metabolism (MuSIASEM): theoretical concepts and rationale. Energy 2009;34:313e22. [30] Giampietro M, Mayumi K, Sorman AH. The metabolic pattern of societies: where economists fall short. London: Routledge; 2011.