Material Flow Accounts (MFA) Are Considered Good Indicators of Various Types of Environmental Deterioration

Summary

Prepared by: Romualdas Juknys, Vytautas Magnus University Danguolė Krepštulienė, Statistics Lithuania

Pilot project on Material Flow accounts

The increasing rate of material consumption and the resulting environmental impact threats sustainability and additional measures to make use of natural resources more sustainable are necessary. It was already stressed in the Brundtland Commision raport Our common future (1987) that development can be made far less materially intensive and more economically and environmentally efficient. The Goteborg Council adopted the EU Strategy for Sustainable Development in the year 2001 and one of the six main priorities was formulated – to manage natural resources more responsibly. Decoupling environmental degradation and resource consumption from economic and social development was considered as a key issue in the strategy.

The implementation of the mentioned strategic documents and political decisions increased the need for reliable and comparable information on material use. Despite the fact that the level of current knowledge in cause-effect relations is not sufficient and complex linkages between material flows and their environmental impact are not fully understood, information on material flows use could be considered as an appropriate tool for political decisions in order to make material use more sustainable.

In general, for more sustainable material consumption and decoupling of resource use and environmental impact from the economic growth, two main principles – dematerialization and transmaterialization – should be implemented. The implementation of the dematerialization principle (to get more from less), is oriented to increased eco-efficiency (resource productivity) while the implementation of transmaterialization principle – to the substitution of hazardous materials with non-hazardous and non-renewable materials – with renewable ones.

Material Flow Accounts (MFA) are considered good indicators of various types of environmental deterioration. The general purpose of Material Flow Accounting is to quantify material inputs and outputs of socio-economic systems. Material Flow Accounting is physical environmental accounting approach which tracks the use of materials by socio-economic systems from their extraction to manufacturing; final use and disposal of emissions and wastes. The pilot project on Material flow accounts was the first step in the implementation of Economy-Wide Material Flow Accounts (hereinafter referred to as the MFA) at Statistics Lithuania.

Over the last almost twenty years Lithuania and other newly accepted Eastern EU member states have undergone dramatic reforms. Changes in political system and transition from the centralized to a market economy caused an inevitable economical and social decline. As a consequence of an essentially reduced production, consumption of natural resources and environmental pollution decreased respectively. Taking into account, that Lithuania, as well as Latvia and Estonia were mostly integrated into general soviet economy, most remarkable changes took place namely in these Baltic States. One of the most important questions in this case – are the new EU member states able to reach the level of welfare that would be similar to that of the old EU member states with less intensive consumption of natural resources? An essential attention to the process of convergence of Lithuanian material flow indicators to the level of these indicators in EU-15 countries is dedicated in this report.

The Lithuanian strategy for sustainable development was adopted in 2003. The main strategic goal was formulated as follows: to balance environmental, economic and social development concerns, to ensure a clean and healthy environment, effective use of natural resources, overall economic welfare of the society and, according to economic, social and eco- efficiency indicators until 2020 to achieve the current average level of old EU countries, without exceeding allowable limits of environmental impact.

Changes in material flows during 2000-2006 were analysed by professor of Vytautas Magnus University R. Juknys. Material flow accounts were compiled by specialists of Statistics Lithuania according to the Economy-wide Material Flow Accounting compilation guide (Weisz et al., 2007). Data from the Eurostat’s report “Economy-wide materials flow account, Resource productivity EU-15 1990-2004” were used for the comparison and analysis of convergence processes.

Data available at Statistics Lithuania and other administrative data sources were used in the project:

Official statistics • Biomass: Agriculture statistics (harvest statistics); Foreign trade statistics. • Non metallic minerals: Foreign trade statistics. • Fossil energy carriers; Energy statistics. Other data • Biomass: Directorate General of State Forests, State Forest Survey Service; Ministry of Agriculture (fish capture); Ministry of Environment (number of animals hunted, Statistics on forest berries, mushrooms, medical herbs and reeds). • Non metallic minerals: Geological Survey of Lithuania. • Fossil energy carriers: Geological Survey of Lithuania. • Emissions to air, water: Environmental Protection Agency. • Waste landfilled: Environmental Protection Agency

An analysis of material flows was performed according to a simplified scheme, presented below. The analysis was based on a black box approach and no transformations of materials inside the economic sector were neither accounted nor analyzed.

Domestic Domestic processed material output Economy Import Export

Simplified scheme of material flow analysis

Domestic extraction (DE)

Extracted materials usually includes a part which is used to produce goods and services and unused part of extracted materials, which is often considered as environmental rucksack (Schmidt-Bleek, 1994). Only the used part of extracted materials is included in the material flow analysis and is considered as domestic extraction. Despite the fact that the period under analysis is quite short (2001-2006), essential changes in DE volume can be noted. Alongside a very fast growth of the Lithuanian economy, a fast growth in DE volumes has started as well from the year 2002 and an increase in DE volume by 30% during the investigated 7 years was registered.

Changes in extraction of different material categories were very different and the structure of DE has changed essentially during this period. The share of non-metallic minerals has increased by 22% (from 35 up to 57%), while the share of biomass has decreased consequently (from 63 to 41%).

Imports

Taking into account the fact that separate data on intra and extra EU trade for Lithuania are available only from 2005, joint import and export values were analyzed in the report. A much faster growth in material imports as compared to domestic extraction was characteristic for investigated period. An almost double (1.89 times) increase in the volume of imported materials was registered during the investigated 7-year period and only in the last year under investigation (2006) this fast growth almost stopped.

An especially fast growth in imports of biomass (2.67 times) and metals (3.13 times) was characteristic for the investigated period. As a consequence of different trends in the imports of different material groups, the structure of imported materials was changed rather essentially. The share of metals and biomass has increased almost two times (from 6 up to 11% for metals and from 10 up to 19% for biomass) while the share of fossils decreased from 58 to 49%.

Direct material input (DMI)

The volume of DMI has increased almost 1.5 times in Lithuania and the share of DE, which is usually named as self-sufficiency, came down from 67.5 to 58.9% of DMI during the investigated 7-year period. Both these trends should be considered as unsustainable and result in increased Lithuanian ecological footprint.

The main feature of structural changes in the Lithuanian DMI – an essential reduction in the share of renewables from 45% in the year 2000 to 30% in 2006 and fast approaching to the EU-15 average – 25%. This trend should be considered as unsustainable as well.

For international comparison indicators of DMI were recalculated to DMI per capita and the Lithuanian trend was check against the EU-15 trend. Fast convergence of Lithuanian and EU-15 DMI indicators is characteristic for the investigated period. DMI per capita has increased from 11.2 tonnes up to the EU-15 level (15 tonnes) already in 2004 and reached 17.2 tonnes in 2005-2006. These figures correspond to the EU-15 DMI level in the very

3 beginning of the 1990’s. These figures reflecting fast convergence and even excess of current EU-15 DMI volumes show that warnings of some specialists (Moll et al., 2005) that accession countries, while striving to reach the EU-15 level of welfare, will face difficulties in curbing the growth in the use of resources, unfortunately were right and essential efforts will be needed to change these unsustainable trends.

Physical trade balance (PTB)

Physical trade balance (PTB) reflects the difference between volumes of imported and exported materials (metric tons). The European Union is a net importer of materials in physical terms and Lithuania is not an exception. A synchronic growth of physical imports and exports was characteristic for the Lithuanian economy, and PTB increased almost 1.8 times during investigated 7-year period.

Biomass is only a material category with negative PTB in Lithuania, and annual exports of biomass exceeded imports by almost 1.5 mill. tonnes on average during investigated period. PTB of other material categories was on the gradual increase during the investigated 7-years period. PTB of fossil energy carriers increased by 31%, and PTB of non-metallic minerals almost doubled.

Lithuanian and EU-15 PTB trends were compared on the basis of PTB per capita data. In EU- 15 countries, PTB per capita during the last five years is kept on almost the same level (2.7 tonnes); however, a very fast growth in PTB is characteristic for Lithuania and this indicator has increased from 0.91 t up to 1.66 t during the investigated period. In the case of same trends, full convergence of EU-15 and Lithuanian PTB indicators could be achieved already in the nearest 3-5 years.

Domestic material consumption (DMC)

Domestic material consumption (DMC) equals domestic extraction plus imports minus exports or can be expressed as a direct material input minus exports. On the other hand, DMC represents that part of materials which earlier or later will turn into emissions or wastes, and it is a reason why DMC rather often is considered as a domestic waste potential (Weisz et al., 2006).

The volume of DMC has increased by one-third during the investigated 7-year period. A very fast growth in DMC has started from the year 2002, and this time coincided with the beginning of a very fast recovery of Lithuanian economy. However, despite the further fast economic growth, a much slower increase in DMC took place from the year 2005, and the first signs of relative decoupling of material consumption from the economic growth became rather obvious.

Changes in DMC for the main material categories were very different. Taking in absolute volumes, DMC of non-metallic minerals increased 2.1 times, fossil energy carriers – by one- third. At the same time, DMC of biomass was reduced by 15%. These changes resulted in essential changes in the structure of DMC. The share of biomass in general DMC was reduced from more than half in 2000 to one third in 2006, and vice versa, while the share of non-metallic minerals increased from one-third to more than half (52%).

4 Fast convergence of Lithuanian DMC to the average level of EU-15 countries is very obvious in this case as well; – however, the pattern of this process is quite different from that for direct material input. DMC in EU-15 countries has been on a slow decrease during the last several years, and an increase in the Lithuanian DMC has almost stopped. Despite the fact that the presented time series are too short for serious conclusions, the current trends look quite promising from the point of sustainability.

Domestic processed output (DPO)

The main part of DPO, which consists of more than 90% of general DPO, usually is named as emissions (emissions to air, water and land). The second part of DPO is named as dissipative use of products and mainly consists from materials used in agriculture (organic and mineral fertilizers, pesticides, compost, seeds). Third part of DPO – dissipative losses, consist from abrasion from tires, friction products etc. Because of the lack of completed data, only the first and the main part of DPO – emissions to air, water and land – were accounted in this report.

The general amount of emissions to air, water and land increased by 28.7% during 2000– 2006, and some reduction in DPO as compared with previous year was registered in the year 2006. As evaluated on a per capita basis, DPO made up 5.5 t per capita in 2006 and was approximately two times less than in EU-15 countries on average.

The highest rate of growth was characteristic to solid wastes which are considered as emissions to land, and the amount of this group of emissions increased by 73.9% during the investigated period. An increase in emissions to air and water was not so pronounced and made up 21.5 and 26.3% consequently.

Considering possible ways to reduce DPO and environmental pressure more essentially, it is necessary to remember, that a lion’s share (approximately three quarters) of DPO can be addressed to the combustion of fossil fuels. Cardinal changes in energy carriers and defossilization of economy can be considered as the most promising option to drive global economy towards a more sustainable way.

Material productivity

Indicators of eco-efficiency measures the efficiency with which ecological resources (energy, materials) are used to generate goods and services and are of particular importance to evaluate the level of dematerialization and course of decoupling of the environmental impact from the economic growth (Sun, 2000; WBCSD,2000). Eco-efficiency is expressed as a ratio of monetary value of goods and services, most often GDP, to the amount of consumed ecological resources. Rather often the inverse of eco-efficiency or resource productivity – eco-intensity (energy intensity, materials intensity) is used as an indicator of sustainability (Gee and Moll, 1998; Miskinis, 2002).

During the investigated 7-year period, material productivity increased by 12.2% (from 475 to 533 Euros per tonne) in Lithuania; however, a more essential growth in material productivity was registered only during very end of the investigated period when this indicator increased by 9% during the last two years.

Taking into account the objective foreseen in the Lithuanian strategy for sustainable development – to reach the level of indicators in eco-efficiency of EU-15 countries up to

5 2020, correct international comparison of eco-efficiency indicators (material productivity, material intensity, etc.) is very important. In this context, it is necessary to drive attention to the remark of Eurostat, which is usually presented in the headings of information on integrated indicators with GDP as a denominator. This remark sounds as follows: basic figures are expressed in PPS (Purchasing Power Standards), i.e. common currency that eliminates the effects of the differences in price levels between countries allowing meaningful volume comparisons of GDP between countries. In the cases when this rule is neglected, a serious methodological mistake is made and wrong conclusions on extremely low resources productivity in the new Eastern EU member states, as compared to EU-15 countries are made. An analysis of Lithuanian and EU-15 data on material productivity showed, that when correct comparison is made and GDP is expressed in PPS (Purchasing Power Standards, Eurostat data), material productivity (GDP/DMC) for the year 2004 was 1.68 times lower in Lithuania than in EU-15 countries (1644 PPS/t. in EU-15, 977 PPS/t. in Lithuania).

The difference is still very big; however, taking into account the current trends of Lithuania’s development presented in this report, the strategic objective to reach the EU-15 level according to this indicator up to the year 2020, seems manageable.

Concluding remarks

Alongside fast growth of the Lithuanian economy, a fast growth in the main indicators of material flows (DMI, DMC, PTB, DPO), and convergence to the EU-15 level of material flows per capita is characteristic for the investigated 2000-2006 year period. In case of the same trends, full convergence of the most EU-15 and Lithuanian material flow indicators could be achieved already in nearest 3–5 years.

The main feature of structural changes of direct material input and domestic material consumption – an essential reduction in the share of renewables (biomass) and fast convergence to EU-15 average according to this indicator. Both these trends do not correspond to the basic principles for sustainable use of natural resources (dematerialization and transmaterialization) and should be considered as unsustainable.

Concerning the question that was formulated – “are the new Eastern EU member states able to reach the level of welfare similar to old EU member states with less intensive consumption of natural resources“, the answer for current situation is negative.

Some positive changes can be noted at the end of the investigated period, when the increase in domestic material consumption was stopped or direct material input even started to decrease. Despite the fact that presented time series are too short for serious conclusions, but these changes look quite promising from the point of sustainability.

Relative decoupling of material consumption from the economic growth (GDP) is characteristic for the analyzed period. Despite the fact that during the entire 7-year period material productivity increased only by 12.2%, the most essential and most growth in material productivity from the point of view of sustainability was registered at the very end of investigated period, when this indicator has increased by 9% during last two years. Another positive trend in Lithuanian material flows – a decrease in emission amount per unit of consumed materials. The DPO/ DMC ratio decreased from 49.1% at the beginning of the period to 46.7% in 2006.

A comparison of Lithuanian and EU-15 data on material productivity has showed that when a correct comparison is made and GDP is expressed in PPS (Purchasing Power Standards), material productivity (GDP/DMC) for the year 2004 was 1.68 times lower in Lithuania than in EU-15 countries. Taking into account the current trends of Lithuania’s development, the strategic objective to increase this indicator up to the EU-15 level until the year 2020, despite the current global economic problems, seems manageable.