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Material Flow Analysis

Heinz Schandl, Commonwealth Scientic and Industrial Research Organization, Canberra, ACT, Australia

Anke Schaffartzik, Institute of Social Ecology, Alpen-Adria University, Vienna, Austria

2015 Elsevier Ltd. All rights reserved.

Abstract

All societies depend on natural resources to feed, house, and transport people and to produce the goods and services everyday

life depends upon. The magnitude of the physical interaction between society and nature may be measured through material

ow accounting. The accounts measure the amount of materialsextracteddomestically biomass, fossilfuels, metal ores, and

construction materials as well as traded materials and also measure the disposal of waste and emissions to the environment

by taking a whole life cycle perspective. The accounts measure yearly material ows in tonnes and provide an information

base about the scale of natural resource use that underpins human development and economic prosperity. Material ow

accounts havebecome part of the system of integratedeconomyenvironmental accounts and inform modern environmental

policy making that understands environmental outcomes are greatly related to the process of consumption and production.

Indicators based on material ow accounts play a major role in the environmental policy process and gure prominently in

international debates about sustainable consumption and production, resource efciency and decoupling, and the green

economy.

Introduction

The study of material ow accounting (MFA) focuses on the

natural resource requirements of national economies, specic

economic activities (such as construction and housing, trans-

port, and mobility), or geographical units such as cities. MFA

accounts for the input of primary materials biomass, fossil

fuels, metal ores, and minerals and semimanufactures and

nal goods into economic activities. MFA also accounts for the

outputs of economic systems includingnal goods for export,

waste, and emissions. MFA often conceptualizes the economic

system as a black box.There are, however, accounting strate-

gies for material ows within economic systems available as

well.Material ow accounts are complementary to economic

accounts and measure tonnes of materials that are associated

with production and consumption processes. The accounts

measure the physical implications of economic systems and

allow links to be established between economic activities

and the natural resource base and natural environment they

depend upon. Material ow accounts can therefore be used

as tools in both environmental and economic policy.

Material ow accounts have grown in political importance

over the past decade in response to converging environ-

mental and economic pressures such as climate change, food

security, rising energy costs, and the global nancial crisis of

2008.

MFA has a sound theoretical base in the theory of social-ecological systems and the concept of social metabolism and

industrial metabolism (Ayres and Simonis, 1994). MFA oper-

ationalizes the concept of metabolism, provides an under-

standing of the amounts of natural resources used in different

economies at different times in history, and has a multitude of

application scales global, regional, national, subnational,

urban, businesses, and households and a variety of policy

applications in the context of integrated economic and envi-

ronmental policy making.

History of MFA

For a long time, there has been recognition that all economic

activities depend on the timely availability and affordability of

natural resources. Major economic powers such as the Soviet

Union and the United States of America have established

accounts of their natural resource base and resource require-

ments and the supply systems that deliver those resources. The

most prominent example is the Paley report of the 1950s

(Paley, 1952) comparing the resource base of the United States

and its allies to those of the Soviet Union.

Early research that pioneered a physical accounting

approach in economics includes the work of Nicholas

Georgescu-Roegen, Herman Daly, and Robert Ayres.Georgescu-Roegen was one of the rst economists who

assessed the interplay of economic activity and the natural

environment within the concept of thermodynamics

(Georgescu-Roegen, 1971). Herman Daly introduced the

notion of scale referring to the total volume of resource ows:

the matterenergy throughput taken from the environment as

low-entropy resources and returned to the environment as

high-entropy waste. Scale, according to Daly, is relative to

environmental carrying capacity and is often ignored by

mainstream economics (Daly, 1992). Robert Ayres published

an early material ow account for the United States that set an

analytical standard for the next generation of MFA studies

(Kneese et al., 1970).

National material ow accounts were pioneered in Ger-many, Japan, and Austria in the early 1990s ( Fischer-Kowalski

and Httler, 1998). The World Resources Institute published

two groundbreaking comparative studies Resource Flows: The

Material Basis of Industrial Economies (Adriaanse et al., 1997)

and The Weight of Nations (Matthews et al., 2000) that

highlighted differences in methodology and triggered a process

of methodological harmonization and standardization. The

European statistical ofce EUROSTAT has since been ne-

tuning methods and has produced several iterations of the

760 International Encyclopedia of the Social & Behavioral Sciences, 2nd edition, Volume 14 http://dx.doi.org/10.1016/B978-0-08-097086-8.91060-2

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MFA methods guidebook (Eurostat, 2012). The OECD, sup-

ported by a political decision of the leadership of the group of

eight (G8) at Sea Island in 2008, identied the policy impli-

cations of MFA data and indicators in a series of reports and

further supported the process of standardization of material

ow and resource productivity information (OECD, 2008).

Most recently, MFA was integrated into the system of envi-

ronmentaleconomic accounting helping to establish a sound

base for environmental accounts at national, regional, andglobal levels (UN, 2014).

The sustainable development discourse that emerged in the

1990s profoundly changed the way in which the policy

community viewed environmental problems. The new

sustainability discourse helped establish the notion of decou-

pling of economic activities from environmental pressures and

impacts. In essence, sustainable development suggested a new

path to development in which the exploitation of natural

resources, the direction of investments, the orientation of

technological development, and institutional change are all in

harmony and enhance the current and future potential of

socioeconomic systems to meet human needs and aspirations.

As a consequence of the new sustainable development

discourse, many national governments and internationalorganizations such as the United Nations have moved from

a conservationist approach in environmental politics to

a new understanding of the social and economic drivers that

cause environmental pressures. MFA measures a specic

aspect of environmental pressures and allows progress in

resource efciency and decoupling to be assessed. This new

policy orientation has inspired a large number of global and

regional studies into natural resource use and economic

development.

Scientically, MFA is used as a data organization strategy

and an analytical tool in the research elds of industrial

ecology and ecological economics,but also gures prominently

in physical environmental history (Krausmann et al., 2008)

and environmental sociology (Fischer-Kowalski and Haberl,1997).

Accounting Standards and Headline Indicators

MFA assembles data on material use, often at the national level.

The accounting is based on the concept of industrial metabo-

lism and starts from a clear denition of system boundaries

between economy and nature (and national borders between

economies) and an assessment of physical stocks, for example,

buildings and transport infrastructure, but also livestock

animals and people. It measures the yearlyows of materials

required to fuel and maintain existing stocks, to replace stock

that has become depreciated, and to build new stock. Theaccounts provide data on material inputs into, the changes in

material stock within, and the material outputs in the form of

goods for exports or discharge of waste and emissions to the

domestic environment of an economy. MFA covers all solid,

gaseous, and liquid materials that are mobilized in economic

activities with the exception of bulk water and air. Water is

usually treated in a separate water account and air is dealt with

as a memorandum item when closing the material balance of

an economy.

The unit of measurement of an MFA is most commonly

(metric) tonnes. Inputs are distinguished by their origin, i.e.,

whether they are extracted domestically (domestic extraction,

DE) or are imported goods from other countries (imports, IM

and exports, EX). Primary material inputs are most commonly

grouped into four main aggregate material groups: biomass

(renewable), and fossil fuels, metal ores, and industrial and

construction minerals (nonrenewable). The outputs are

distinguished by gateways through which they leave theeconomy and include goods exported, waste to landll, and

emissions to air and water. Material ow accounts aim for close

complementarity with economic accounts and include mate-

rials at the commodication stage, i.e., when a natural resource

becomes a primary material and a market value is attached. In

order to provide a complete picture of the physical interaction

of the economy with the environment, this complementarity to

economic accounts cannot always be upheld and the accounts

include a number of inputs that have no market value attached.

This is the case for biomass grazed and scavenged by livestock,

crop residues that are used economically in the context of

a farm, the waste rock component of metal ores, and sand and

gravel that is extracted within the connes of a construction

company on the premises of the company to mention the mostimportant categories. Overall, material ows that have no

market value attached make up 20% of global materials

extraction.

Materials that are mobilized in the course of economic

activities but do not enter the production process as such are

classied as unused extraction. They may include earth move-

ment in mining and agriculture, by-catch in sheries, and by-

harvest of timber and are usually left where they occur. These

ows are classied as unused DE (Figure 1).

A full material ow dataset hence comprises all economi-

cally relevant material exchanges and enables the construction

of a set of indicators. These are increasingly used by national

governments and businesses. The standard headline indicators

derived from an MFA account include the following:Direct material input (DMI), which measures the overall

material input into a national economy and is calculated as the

sum of DE and imports (DMI DE IM).

The physical trade balance (PTB) is a measure of net trade

and is calculated as the difference between imports and

exports. The PTB is the reverse of the monetary terms of trade

Domesc environment

Economy

Imports

Domesc

extracon

Exports

Domesc

processed

output

Air and

water Water

vapour

Stocks

Addions

to stock

Figure 1 The material cycle.

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and shows whether a country is a net importer of materials

and hence depending on the world market for primary

materials to satisfy the physical requirements of its economy,

or a net exporter supplying primary resources to global

markets (PTB IM EX).

Domestic material consumption (DMC) is a measure of

apparent consumption of an economy and is calculated by

adding imports and subtracting exports from DE of materials

(DMC DE IM EX or DMC DE PTB).Domestic processed output (DPO)provides a comprehensive

measure of all materials that leave an economy at any stage.

Included in DPO areemissions to air, industrial and household

waste deposited in landll, material loads in wastewater, and

materials dispersed into the environment as a result of

product use.

Net additions to stock (NAS)measures the yearly addition to

the stock of buildings, transport infrastructure, productive

capacity, and durable consumer goods. It subtracts materials

that are discarded from gross additions to stock (NAS DMI

DPO EX).

MFA accounts are a rst step toward a satellite account for

materials to the systemof national accounts (SNA) and provide

a rich analytical database and indicators to inform modern,integrated economic and environmentally minded policy

decisions.

The complementarity of MFA and national accounts allows

material efciency (ME) indicators to be calculated. The ME is

usually expressed as material intensity, i.e., the amount of

material required per unit of economic output. It is measured

by dividing DMC by gross domestic product (GDP). Efciency

can also be expressed as material productivity (GDP/DMC)

which is the inverse of material intensity.

Most studies and policy reports to date have focused on

these indicators and hence have presented a production-

focused perspective on the material requirements, waste and

emissions of economies. In the context of global concern for

resource supply security and global fairness a consumption-based approach to material use has been introduced, to

complement other consumption-based indicator systems such

as those for energy use (Wiedmann, 2009) and carbon emis-

sions (Hertwich and Peters, 2009) which have pioneered

consumption-based analysis. When countries import goods,

the primary resources required to produce those goods remain

in the country of origin. At the same time, when a country

exports goods the primary resources required to produce the

good remain in the country. Traded goods are measured at the

time when they cross the boundary between countries (direct

imports and exports) but they are related to an indirect material

requirement referred to as the raw material equivalent (RME).

RME refers to the primary materials that were required to

produce the goods and can be measured with various analyticaltechniques (Munoz et al., 2009).

More recently, the notion of material footprint (MF) of

consumption was introduced (Wiedmann et al., 2013). The

MF of an economy is accounted for through the attribution of

global material extraction to nal consumption in a country

and requires a global, multiregional inputoutput framework

as an analytical tool. Alternatively, the upstream and down-

stream requirements of traded goods could also be measured

by employing life cycle analysis coefcients REF. Both

approaches have been tested but are still considered immature

with regard to the robustness and reliability of results. Tech-

nically, MF can be expressed as DE plus the RME of imported

goods, RMEIM minus the RME of exported goods, RMEEX(MF DE RMEIM RMEEX).

The MF indicator allows the establishment of a revised ME

indicator which is sensitive to the burden shifting that occurs

between nations importing and exporting natural resources.

Material intensity is now measured by dividing MF by GDP.

Applications of MFA

Most commonly, material ow accounts are established for

national economies. These accounts complement economic

accounts and report progress in the ME of nations. Such

accounts now exist for most OECD countries and a number of

developing countries. While early studies focused on descrip-

tive aspects of a countrys material use, the level of analytical

sophistication has continued to increase. More recent studies

discuss the social and economic drivers of material use, look at

the economic structure of a country and the role the country

plays in the world economy, analyze trade patterns and theirmaterial underpinnings, and unpack policy implications of

materialow accounts.

Materialow accounts often conceptualize the economy as

a black box and focus on those inputs and outputs for which

data are more easily accessible than for material exchanges

within an economy. As a consequence, material ow accounts

for specic economic activities have been rare. To gain a good

understanding of the material interrelationships within

a national economy requires a full physical inputoutput table

(PIOT) of that economy. Establishing such a table is very data

and time intensive and forthis reason PIOTs are often outdated

when they are published. PIOTs do, however, exist for

Denmark and Germany (Weisz and Duchin, 2006) andprovide

in-depth insight into the material interactions within thoseeconomies.

Materialow accounts for cities have been another focus of

the research community and many case studies have become

accessible recently. Urban material ow accounts also have

a long history and go all the way back to the early work of

Stephen Boyden (Boyden et al., 1981) and Abel Wolman

(Wolman, 1965). Accounting for urban metabolism using

similar accounting strategies to national MFA has become

a very active area of research more recently (Weisz and

Steinberger, 2010).

During the past two decades, material supply and demand

relationships in the world economy have become ever more

complex and have introduced a new focus in MFA, looking at

upstream and downstream material requirements for tradedgoods.

Globalization of production and consumption processes

has increased the spatial disconnect between primary natural

resource supply and centers of demand and has added

complexity to societies metabolism. In many economies,

a proportion of resources extracted domestically is used for the

production of traded goods while at the same time high-end

processed goods with substantial amounts of embodied

materials and energy are imported. Standard MFA does not

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distinguish whether resources are extracted to satisfy domestic

or foreign nal demand and the structure of production and

the origin of material inputs remains unknown within the

black box that represents an economy. Environmentally

extended inputoutput analysis (EE-IOA) based on the work of

economist Wassily Leontief (Leontief, 1970) supports the

analysis of production structure and intra-industry relation-

ships within the black box.

MFA and EE-IOA cover the ows of material, energy, andmoney within the economy, but not accumulated physical

and monetary capital or the stocks of buildings, infrastruc-

ture, productive capital, and durable consumer goods which

play a central role in the economy, and in consumption and

everyday life. They provide physical services such as shelter,

mobility, and industrial capacity, representing large accu-

mulations of material and investment. They are usually long

lived and their depreciation time determines the amount of

material required to maintain or replace them. Physical

stock also determines the speed at which new technologies

can penetrate markets, and there are technical properties

that link service provision with energy and material

throughput. Understanding the dynamic properties of

physical stock in use is the subject of dynamic stockmodeling (Muller, 2006).

MFA has also underpinned a variety of local studies, mostly

in developing countries REF looking into the current metabolic

transition, and historical studies of social metabolism

providing long-time accounts (centuries) of industrial devel-

opment and changing natural resource bases (Fischer-Kowalski

et al., 2011). MFA data and indicators have assisted in empir-

ically exploring the nonlinear relationship between material

and energy use and human development (Steinberger and

Roberts, 2010).

Policy Use

The information provided by material ow accounts is

increasingly being used by the policy and business communi-

ties. Most notably, material ow accounts have become an

essential partof environmental satelliteaccounts to the SNA and

offer an alternative to the green accounting approaches of the

1970s and 1980s (Bartelmus, 2003). Material ow data show

the quantity of natural resources required per unit of output in

a national economy, for a certain economic sector or activity,

and provide insight into the eco-efciency of the production

process in different countries and different economic sectors.

They allow for benchmarking and target setting and for moni-

toring progress in resource efciency and waste minimization.

They also form an important part of triple bottom line

accounting in businesses and industries (Foran et al., 2005).Material ow accounts allow the creation of a set of pressure

indicators to monitor thephysicalow of natural resources and

waste and emissions between economy and environment.

Pressure indicators allow for a swift policy response, even

before pressures have led to changes in the state of the envi-

ronment and are causing visible impacts. This allows much

shorter response times for environmental policy making with

regard to major environmental problems including the deple-

tion of natural resources, climate change, biodiversity loss, and

problems related to growing amounts of household and

industrial waste.

Decoupling has become a signature concept of modern

integrated economicenvironmental policy (UNEP, 2011a)

and refers to the ability to expand the economy while reducing

material and energy use, as well as waste and emissions. This

may occur through the adoption of new technologies and

innovations in major systems of provision including agricul-

ture and food, construction and housing, and transport andmobility but also in heavy industries such as iron and steel,

cement, and paper production. Decoupling is based on theidea

of achieving more human well-being with less environmental

disruption. The potential for efciency gains is very large in

many sectors of the economy, sometimes up to 80% (Von

Weizsaecker et al., 2009).

The new policy concepts of sustainable consumption and

production, resource efciency and waste minimization, and

investing in a green and low carbon economy depend on

information about material ows to set objectives and targets,

monitor progress, and evaluate policy outcomes. Many coun-

tries and regional bodies have developed their national strate-

gies andframework policies to deliver human development and

economic growth while minimizing natural resource depletionand environmental degradation. Examples include the Euro-

pean Union Resource Strategy supporting a resource-efcient

Europe (EU, 2011) and the material ow accounts delivered by

member countries and published by the European statistical

ofce to monitor progress, the Chinese law to promote

a circular economy (UNEP, 2011b), and the Japanese policy

framework for a Sound Material Cycle Society REF which

includes a set of material ow-related targets including material

productivity of the economy, therecycling rate, and theamount

ofnal waste disposal (Takiguchi and Takemoto, 2008).

The economic context for material use has changed

profoundly. Economic development in the twentieth century

was fueled by affordable natural resources, and prices were

declining during most of the century. Since 2000, the price ofmost natural resources has been rising and price volatility has

increased because of the vast resource demand of many

developing economies, especially China, and supply capacities

have fallen behind demand. In this new economic context,

national governments and business leaders require an extended

set of information for decision making beyond monetary

economic indicators. Material ow accounts and indicators

provide this information.

See also:Ecological Economics; Environmental Sociology;

Industrial Ecology; Sustainable Production and Consumption.

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Relevant Websites

http://is4ie.org/ International Society of Industrial Ecology.

http://www.unep.org/resourcepanel/ UNEP International Resource Panel.

764 Material Flow Analysis

http://is4ie.org/http://www.unep.org/resourcepanel/http://www.unep.org/resourcepanel/http://is4ie.org/