economy-wide material flow accounts – importance and analysis of indirect flows

National accounts

Environmental accounts

Economy-wide Material Flow Accounts – Importance and

analysis of Indirect flows

Aldo Femia, Donatella Vignani 10th London Group MeetingNew York, 19-21 June 2006Second day Session on Physical flow accounts and hybrid accounts

A. Femia - D. Vignani, 10th London Group meeting, New York, 19-21 June 2006

National AccountsEnvironmental accounts

A global target for Natural Resource Use

Total Material Requirement (TMR)

The Italian Environmental Strategy Action Plan for Sustainable Development suggests, among others, the target of a reduction of natural resources exploitation by 25% within 2010: this target is fixed in reference to the TMR, possibly in comparison with Gross Domestic Product (GDP)

TMR is the widest indicator in the EW-MFA as it measures the total “material base” of an economy.



Empirical evidence for the long term-trend

The TMR has grown by 21% from 1980 to 2003The TMR has grown by 21% from 1980 to 2003

1.000

1.200

1.400

1.600

1.800

2.000

2.200

2.400

1980

1981

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2003



-

500

1,000

1,500

2,000

2,500

1980

1981

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Indirect Flows

Direct Flows

… and its components? Direct and Indirect flows



They are the up-stream uses of resources necessary, in a life-cycle perspective, in order to realise the imported products, though not embodied in them.

These are both used and unused natural resources that have been taken from the environment abroad.

This matter has not been embodied in the products: it has been given back to the environment as residual matter (emissions to air and water, and waste). IF therefore also represent a proxy for the additional potential pressures activated by the demand for the products imported, avoided by the importing country.

What are Indirect Flows associated to Imports



The growth of Indirect Flows

Italy can contribute to the reduction of resource use worldwide mostly by putting under control the foreign components of its TMR

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200

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1.000

1.200

1.400

1980

1981

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2004

Indirect Flows associated to Italian Imports, 1980-2004

Slowdown of

growth in 1993 - 2004:

+ 5,3 %

Slowdown of

growth in 1993 - 2004:

+ 5,3 %

1980-2004

+ 80%

1980-2004

+ 80%



Analytical setting: effects decomposition

IF (IF/Ip) * (Ip/Iv) * (Iv/Y) * Y

Imports’ penetration

(globalisation)

Imports’ Indirect Flows

Level of economic activity

(economic growth)

Average IFs activation

per Imports’ physical unit

Average Imports’

weight per unit value



Focus: physical determinants

Let us split the identity in two parts:IFtot (IFtot/Ip)*Ip

andIp (Ip/Iv)*(Iv/Y)*Y

We will focus on the first part, and in particular on its first factor, after a quick look at the change of Ip and the way its drivers contributed to its change



Contributions of IF intensity and of Imports’ growth to overall IF growth

-100

0

100

200

300

400

500

600Cumulated contribution, million tons

of IF intensity of Imports (IF/Ip)

of Imports’ growth (Ip)

Overall change of Imports’ IF

The cumulated contribution of IF intensity has peaks in 1993 and 1998, then decreases rapidly and in 2004 explains only 10% of overall IF growth.

The tendency of Import’s growth contribution is quite steady.

Both components grow until the beginning of the 1990s.

Both components grow until the beginning of the 1990s.



Macro driving forces of physical Imports

Economic growth

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500

1.000

1.500

Billio

n e

uro

+ 53,4 %

1980-2004

Imports’ penetration (globalisation)

-

0,05

0,10

0,15

0,20

0,25

0,30

+ 62,9 %

1980-2004

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200

400

600

8001.000

1.200

1.400

1.600

1.800

2.000

To

ns p

er

millio

n e

uro

-37,3 %

1980-2004

Average Imports’ weight per unit value (tertiarisation)

Average Imports’ weight per unit value (tertiarisation)



IF Intensity: two sub-periodsRatio between indirect flows associated to

imports and actual import

flows, Italy, 1980-2004

(tons per ton)

2,00

2,50

3,00

3,50

4,00

4,50

The IF intensity of imports has grown throughout the 1980s. It reached a peak in 1993 and then decreased, though not going back to the initial values.This is at the origin of IF’s growth slowdown from 1993 onwards.



How to decompose IF intensity

The overall IF intensity can be seen as a weighted average:

IF/Ip i (IF/Ip)i * (Ipi /Ip)

The disaggregation helps understanding the reasons for the

trend

Average IF intensity of component i

of the Imports

Share of component i

on total Imports



We analysed the following sub-periods:

1988-1993: overall IF intensity grows from 3,11 to 4,151993-2004: overall IF intensity falls from 4,15 to 3,13.

What kind of changes determined this evolution?

We tried to understand it by breaking down the Imports and their respective Indirect Flows: • by kind of material (i : B,F,M,P)

• by geographical origin (i : countries) (for selected commodities only).

• by use destination (i : intermediate/final/mixed)

Dimensions of the analysis



Analysis by kind of material

on average 16% of imports and 9% of IFs








Biomasses and products thereof

Fossil fuels and products thereof

Minerals and products thereof

Composite products



Composition and intensity by material

Sources of overall Imports’

IF intensity change

1988-1993 (yellow)

and

1993-2004 (red)-1,50

-1,20

-0,90

-0,60

-0,30

-

0,30

0,60

0,90

1,20

1998-1993 1993-2004

Contribution of changeswithin material groups

Contribution of changing composition by material

The two sub-periods display opposite trends.

It is the change within the groups that explains most of the story.

In the second sub-period the change in composition between the groups gives a tendency towards higher IFs.



4,0

6,0

8,0

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12,0

14,0

16,0

1988

1989

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2004

but the intensity of their contribution to indirect flows had the opposite dynamics

but the intensity of their contribution to indirect flows had the opposite dynamics

Minerals’ IF intensityMinerals’ IF intensity

The main component: minerals

21%

22%

23%

24%

25%

26%

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Minerals' share in Imports

The share of minerals in Imports first decreased and then increased

The share of minerals in Imports first decreased and then increased

1993



Analysis of specific commodities’ IFs

A subset of Minerals and products thereof : ores and precious metals

representing 0,9 % of total Imports, to which are associated 28,9 % of total IFs on average in 1993-2004

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1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Indirect Flows associated to Ores and precious metals’ Imports, million tons

Indirect Flows associated to Ores and precious metals’ Imports, million tons

These flows

decreased

significantly

These flows

decreased

significantly



First-level determinants

Profile of the overall volume of direct imports and of the average IF intensity of

ores and precious metals

Profile of the overall volume of direct imports and of the average IF intensity of

ores and precious metals

40

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1993 19941995 1996 19971998 19992000 20012002 2003 2004

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Th

ou

san

d t

on

s

Indirect flow intensity Direct Imports



Overall shift-share effects on IF intensity

The change is due almost only to the shift between products, towards ores and minerals with lower average coefficients. Is this change also connected to changes in the countries that supply them?

-120

-100

-80

-60

-40

-20

-

Effect of changes of average IF intensities of individual commodities (due to the change of supplying country)

Effect of changes of average IF intensities of individual commodities (due to the change of supplying country)

Effect of changes of composition by commodity Effect of changes of composition by commodity



Changing the sources of materials

The sources of these materials have sensibly changed: more than 70% of the change in average intensity is due to the shift between continents

The sources of these materials have sensibly changed: more than 70% of the change in average intensity is due to the shift between continents

-80,00

-70,00

-60,00

-50,00

-40,00

-30,00

-20,00

-10,00

-

Effect of changes in the continent of origin

Effect of changes in average intensities by origin



Change of continent

0%

20%

40%

60%

80%

100%

Oceania Africa

Share in the italian Imports of ores and precious metalsShare in the italian Imports of ores and precious metals



Average intensity of ores’ imports from Africa

-20

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30

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601993

1994

1995

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2003

As the share of quantities imported from Africa fell, their unitary upstream flows increased dramatically

Cumulated contribution of the shift within African countries as suppliers to the change of the average intensity for ores and precious metals, tons per ton

Cumulated contribution of the shift within African countries as suppliers to the change of the average intensity for ores and precious metals, tons per ton



Analysis by use destination

-1,2

-1,0

-0,8

-0,6

-0,4

-0,2

-

0,2

0,4

Contribution of changeswithin destination groups

Contribution of changing

compositionof imports' destination

Contributions to overall Imports’ IF intensity change 1993-2004

The change in composition by use destination by commodity favoured the growth of IFs.

However, the overall tendency has been dominated by the changes within rather than between the groups.

3 kinds of possible uses of imported goods: intermediate, final, both

3 kinds of possible uses of imported goods: intermediate, final, both



Conclusions and discussion issue

• Indirect flows are an important component, that should not be disregarded in a sustainability perspective for the globalised world

• In spite of the uncertainties connected to their calculation, IFs have great communication power

• It is possible to look behind macro-aggregated indicators (such as total IFs) and try and understand the dynamics that determine their evolution.

• How should these be handled in the upcoming revision of the SEEA?

economy-wide material flow accounts – importance and analysis of indirect flows

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