A systems approach for the monitoring of the physical economy
A systems approach for the monitoring of the physical economy
The size and the complexity of the global material flows have increased drastically over the past decades as a consequence of population growth, urbanization, globalization, technological development (e.g., employment of more complex material combinations in manufacturing), and sophistication in supply chain management. The increased use of materials has been accompanied by an increased energy use and a growing waste and emission generation along the supply chain. This transformation of the physical economy has resulted in growing concerns for the security of supply with critical raw materials and the sustainability of the economic system more generally. Various strategies have been developed in order to address the consequences of this transformation, with an aim to control the physical flows of matter and energy (e.g., the Raw Materials Initiative or Climate Change and Circular Economy actions) (European Commission, 2008, 2011, 2015).
However, the effectiveness of these strategies is severely hampered by a lack of a robust understanding of the physical economy. The MinFuture project is based on the hypothesis that a robust map of the global physical economy is needed in order to address these challenges. Current monitoring programmes often have a monetary focus, which is insufficient due to the lack of addressing flows from and to the environment and the lack of mass-balance consistency. Many efforts have been taken over the last years to improve our understanding of the physical economy. Different government agencies, non-governmental organizations, research institutions, and industry associations have started to map individual aspects of the global physical economy, addressing individual countries or regions, and individual materials. While these efforts have increased our understanding, we are still far away from a sufficiently consistent and robust understanding of the global physical economy needed to inform effective policies and business strategies. These efforts are severely impeded among others by fragmented, inconsistent, non-transparent, and incomplete measurement programmes.
This report aims to address this challenge by developing a methodological framework for the monitoring of the physical economy that facilitates the users in reflecting more systematically about the problems mentioned above and in developing more effective strategies for addressing them. The framework proposed is based on Material Flow Analysis (MFA), a tool widely used for tracking materials and energy in the economy.
The framework distinguishes four dimensions that need to be addressed for a consistent physical accounting of the economy:
- Stages represent the various transformation steps that materials go through during their lifetime, including mining, material production, manufacturing of products, their use, and end-of-life management. These principle stages can be analyzed either at an aggregate level or they can be refined using a variety of sub-processes. A material cycle is constructed by combining the different stages together and illustrating the flows and stocks of material.
- Trade represents the exchange of all goods along the supply chain (between all stages) among countries or regions. Material cycles can be constructed by either showing the trade between a country and the rest of the world, or with individual other countries.
- Layers (or linkages) explore the interactions and changing characteristics of materials across their lifecycle. Material flow layers may explore for instance interlinkages between goods, components, materials, chemical elements, as well as energy or value.
- Time refers to the possibility to track material flows over time, for example the measurement of historical or future stocks and flows of materials by use of scenarios.
Depending on the purpose of an MFA, different dimensions need to be analyzed in more detail.
Seven components organized in a hierarchical structure (pyramid)
The framework further distinguishes seven components of MFA studies:
- Systems describe where the materials are located and where they are going within a given boundary. They form the foundation of any MFA as they define the “coordinates” of the measured and unmeasured stocks and flows.
- Data represent observations of either stocks (at a given point in time) or flows (over a given time period).
- Uncertainty occurs in all practical systems and can result from errors in the system definition or uncertainty in data.
- Models are mathematical representations of material cycles and their assumed drivers. Models are used to simulate historical changes in material cycles or to develop scenarios for future changes.
- Indicators are statistical values derived from the quantified system that provide an indication of the performance of the system. They represent complex systems with individual numbers. They are often used to describe targets and to measure the progress towards reaching the targets.
- Visualizations represent the essence of complex systems using graphical displays. They are used to support the interpretation of the analysis.
- Strategy and decision support represent the last step of an MFA, where the essence of the findings (interpretation) is expressed in terms of words. The findings can be interpreted from a methodological perspective (e.g., where should monitoring efforts be placed to make the results more robust) as well as from a business and government perspective (e.g., where do we expect challenges or where are opportunities arising).
The pyramid components form a hierarchical structure (pyramid), because the robustness of all components depends on the robustness of the components below.
Key principles for developing robust MFA components
The report describes key principles for each component. These allow practitioners to design each of the seven components in a more robust and transparent way, and to communicate the essence of the findings in a more powerful way.
Petavratzi, E.; Allesch, A.; Müller, D.; Liu, G.; Rechberger, H.; Cullen, J.; Lundhaug, M.; Simoni, M.; Heldal, T.; Cao, Z. (2018). A systems approach for the monitoring of the physical economy - MinFuture framework. MinFuture Deliverable D5.1, British Geological Survey