EMERGY SYNTHESIS 2: Theory and Applications of the Emergy Methodology. The Center for Environmental Policy

Transcription

1 EMERGY SYNTHESIS 2: Theory and Applications of the Emergy Methodology Proceedings from the Second Biennial Emergy Analysis Research Conference, Gainesville, Florida, September, Edited by Mark T. Brown University of Florida Gainesville, Florida Associate Editors Howard T. Odum University of Florida Gainesville, Florida David Tilley University of Maryland College Park, Maryland Sergio Ulgiati University of Siena Siena, Italy December 2003 The Center for Environmental Policy Department of Environmental Engineering Sciences University of Florida Gainesville, FL The Center for Environmental Policy P.O. Box vi

2 19 Emergy Evaluation of a Common Market Economy: MERCOSUR Sustainability Mark T. Brown, Cecilia Ferreyra and Eliana Bardi, ABSTRACT Emergy Accounting, is used to explore perspectives on sustainability of the economies of MERCOSUR countries individually, as well as collectively. Emergy evaluations of Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay for c.1998 were completed and compared. The analysis showed significant asymmetries within MERCOSUR, identifying four different types of economies: (1) Bolivia, relying mostly on renewable resource flows; (2) Uruguay, Paraguay, and Chile, with an increasing participation of purchased and nonrenewable resource use; and (3) Chile and Argentina and (4) Brazil, with the highest percentage of nonrenewable resource use. While Bolivia had the highest renewable resource base, all indicators suggest that it has the lowest sustainability. Paraguay and Uruguay enjoy the highest sustainability indices, but Paraguay suffers from serious emergy trade deficits with its trading partners and the world economy in general. Emergy balance of payments resulting from international trade was also evaluated. Trade between MERCOSUR countries and globally was evaluated using an emergy measure of buying power of currencies and an Emergy Exchange Ratio. All MERCOSUR countries when trading globally are at a disadvantage, exporting more value per dollar than they import. Within the MERCOSUR, Argentina benefits most from trade with other member countries when trade is evaluated in emergy terms while Paraguay suffers in all trades with partner nations, exporting more emergy than it imports. One key to sustainable common markets may be equitable trade measured in emergy rather than money. INTRODUCTION In 1991 Argentina, Brazil, Paraguay and Uruguay formed a customs union called the Common Market of the South (Figure 1). The union, commonly known as MERCOSUR, is the fourth largest integrated market after the North American Free Trade Area, the European Union, and Japan (Partenariat, 2001). MERCOSUR entered free trade agreements with Chile and Bolivia in 1996 and 1997, respectively. With a population of 200 million and a GDP around US$ 1 trillion (Table 1), MERCOSUR has considerable market power and influence over trade (Connolly and Gunther, 1999; Brazilian Embassy in London, 2000). Like other regional trade agreements, MERCOSUR has generated a fair amount of debate (Connolly and Gunther, 1999). One of the main concerns is the potential impact of the integration on the natural resource base of the countries. The MERCOSUR Treaty recognized conservation of the environment as one of its main objectives. However, Godynas (1997) notes MERCOSUR norms do not have a supra-national legal status, requiring an independent approval by each of the countries separately. As each country takes its environmental measures in isolation, consensus has not been reached on an envi-

3 Figure 1. Map of the Southern Common Market. (Source: Foreign Office, 2001) (Source: Brazilian Embassy in London, 2000) ronmental strategy for the common market. A Framework Accord on the Environment of MERCOSUR was approved in March According to Valente, (2001), reactions to the document have been wide ranging, some supporting its pragmatism and others considering it a major reversal. The accord stresses cooperation on sustainability issues as long as it does not interfere with much-needed economic development. Notwithstanding the importance of legal agreements and coordination, quantitative measures of sustainability are a prerequisite to the design of appropriate environmental regional policies. In this paper Emergy Accounting, of the economy and environmental contributions of the MERCOSUR countries was used to explore perspectives on sustainability and to highlight trade issues between countries within common markets. Insights gained may apply to issues of globalization where some economies by virtue of their emergy intensity and the buying power of their currency can strip resources from smaller economies with higher renewable resource bases but lower buying power. METHODS The approach taken in this study consisted of an emergy evaluation of MERCOSUR members (Argentina, Brazil, Paraguay, and Uruguay) and associates (Chile and Bolivia) for 1991, 1994, and 1997.

4 Table 1. Emergy flows supporting economies of MERCOSUR countries (c 1998) Renewable (R) Nonrenewable (NR) Purchased (F) Total Use (G) (E 22 sej/yr) (E 22 sej/yr) (E 22 sej/yr) (E 22 sej/yr) Bolivia Paraguay Uruguay Chile Argentina Brazil MERCOSUR USA(1998)* World (1995)** * from Rodrigues (2002) ** from Brown and Ulgiati (1999) Emergy driving MERCOSUR economies comes from three main sources: renewable inputs of biospheric emergy (outside sources), imported, nonrenewable sources (purchased goods, fuels, services), and indigenous nonrenewable energy sources (soils, wood, and fossil fuels harvested or used from within each country). These inputs were evaluated for each year, along with emergy balances of payments resulting from international trade. Data were obtained form the literature. The general methodology for emergy evaluations has been explained in numerous publications (Odum, 1996; Brown and Ulgiati, 1997) and thus only very brief methods are given here. The first step is to construct systems diagrams that are a means of organizing the analysis and elucidating relationships between components and pathways of exchange and resource flow. The second step is to construct emergy evaluation tables directly from the diagrams. The final step involves calculating several emergy indices (Brown and Ulgiati, 1996; Ulgiati and Brown, 1995, Ulgiati et al. 1994) that relate emergy flows of the economy with those of the environment, and are used to predict economic viability, carrying capacity and over all sustainability. Expressing the economy in emergy terms and relating the emergy to monetary flows provides insights related to international flows of money and resources leading to evaluation of sustainability of trade. The flows of emergy and money within each economy, once evaluated were further aggregated into main flows supporting the economy as indicated in Figure 2. Several ratios were calculated from the aggregated emergy flows as discussed next. Evaluating Economic Sustainability Three principles are used to judge fitness and sustainability of economies. An economy is more sustainable when (1) it results in at least a minimum of 5.0 E15 sej/capita/yr (the global average per capita emergy use), (2) a larger percentage of its total emergy inputs come from renewable sources: and (3) the economy minimizes the load on the environment. Several indices were calculated from the emergy evaluations and used to judge sustainability and fitness, they are: Per capita Emergy use (sej./ capita/yr), Percent Renewable (%Ren), the Environmental Loading Ratio (ELR), and the Emergy Sustainability Index (ESI). Two additional indices, the Emergy / Money Ratio (EMR) and the Emergy Exchange Ratio (EER), provide links to the monetary economy and provide an index of sustainable trade, respectively. All of these indices are shown in Figure 1 and further defined in Appendix A.

5 Fuels, Minerals F Goods G P 2 P 2 I I Import Services Rural Use Urban Use N 0 P 1 Renewable Energies Nonrenewable N 1 Exports N 2 Rural Env. Systems GDP $ Direct P 1 E Export $ B $ $ Markets N 2 Figure 2. Pathways for evaluating the overall energy use of a state or a nation (adapted from Odum,1996,). Renewable emergy sources = R, Non renewable emergy use = N 0 + N 1, Purchased emergy = F + G + P 2 I. Emergy, Money and International Trade When comparisons are made following an emergy analysis, it is sometimes easier to express the emergy in more familiar terms. Emergy was converted to dollars of buying power ( or emdollars, the term used to describe emergy buying power), based on an average ratio of emergy per dollar of Gross Domestic Product (GDP) in the local economy. The abbreviation for emdollars is $Em to distinguish them from currency dollars. The emergy /money ratio (EMR; units are sej/$) was calculated for each economy by dividing the total emergy use in the economy by its GDP, expressed as US dollars. It is a measure of buying power, in essence quantifying the average amount of emergy that circulates in the economy for every dollar that circulates. Emergy flows were converted to emdollars by dividing emergy by the emergy / money ratio. In like manner, monetary flows in the economy were converted to emergy by multiplying them by the emergy /money ratio for that economy International trade was evaluated by multiplying the dollars of trade by the EMR for the respective economy as indicated in Figure 3. The emergy trade advantage that results from export of a commodity and import of another is the dollars received for the export multiplied by its emprice (the emergy per dollar of the commodity) divided by the dollars spent on an export times its emprice. Emergy Exchange Ratio (EER) of two economies was calculated as the ratio of the two trading partners EMRs.

6 Exports Imports World Economy R GDP Exports Imports Country A Imports R GDP Exports Country B I b P b R GDP a S b (E b ) Country A Emp b Emp a I a P a R GDP b S a (E a) Country B Country A: Emergy/Money Ratio (EMR a ) = Total Emergy Use / GDP a Trade advantage = (P b * Emp b ) / (S b * Emp a ) Emergy Exchange Ratio (EER a ) = EMR a / EMR b Country B: Emergy/Money Ratio (EMR b ) = Total Emergy Use / GDP b Trade advantage = (P a * Emp a ) / (S a * Emp b ) Emergy Exchange Ratio (EER b ) = EMR b / EMR a Figure 3. Trade between nations. Emergy money ratio of an economy is total emergy use divided by the GDP of the country, Trade advantage of country A is the money paid for an imported commodity (P b ) times the emprice (Emp b ) of the commodity divided by the money received for an exported commodity (S b )times its emprice (Emp a ). The Emergy Exchange Ratio of each economy is the EMR of the home country divided by the EMR of the trading partner.

7 RESULTS AND DISCUSSION Total Emergy Use A summary of major emergy flows supporting the economies of the MERCOSUR countries is given in Table 1 (note that while only Argentina, Brazil, Paraguay and Uruguay are members of MERCOSUR, while and Bolivia and Chile are associate members, we have reported results for all six countries). For comparative purposes, the 1998-emergy flows for the US and the 1995 values for the World economy are also presented. The analysis reflects the differences among MERCOSUR members and associates. The six countries can be grouped into four groups based on the relative proportions of emergy inflows from renewable and non-renewable sources: 1. Bolivia: whose economy relies mostly on renewable resources, 2. Uruguay and Paraguay: whose economies are dominated by renewable emergy inputs, but also have flows of non-renewables and purchased emergy, 3) Chile and Argentina with over half of their total inputs from nonrenewable and purchased emergy inflows, and 4) Brazil whose economy is more dominated by non-renewables and purchased inflows, but still relatively low compared with that of more developed economies, like the USA. It is obvious that Brazil dominates the MERCOSUR economy having over 68% of the total emergy flows within the market. Because of its size relative to the rest of the countries, Brazil contributes nearly 64% of the renewable emergy base of the market countries, and nearly 72% of the nonrenewable and purchased emergy use. Argentina and Chile combined contribute about 29% of the renewable emergy base of the market economy and about 27% of the nonrenewable and purchased emergy use. In total, these three countries account for nearly 93% of the renewable emergy base and about 99% of the purchased and nonrenewable emergy use. Total emergy use in the MERCOSUR economy in 1998 was about 2.6 E 24 sej/yr while the US economy was nearly 3 times as large having a total emergy use of about 7.3 E24 sej/yr. Total emergy use in the MERCOSUR economy amounted to less than 10% of the total global emergy use. Emergy Indices of Sustainability The percentage of an economy that is contributed by renewable sources is a good indicator of long term sustainability. Should fossil fuels decrease in availability economies with larger portions of their emergy budgets supported by renewable sources are less likely to exhibit serious dislocations of populations. Table 2 gives renewable percent for the countries of the MERCOSUR. On average, the countries of MERCOSUR have over 41% of the economies supported by renewable sources; in contrast to the USA, which has only about 15% of its resource base from renewable sources. In the short run, competitive advantage is won by economies with low percent renewable resource base and so economic sustainability in the short run is highest for those economies with high nonrenewable use. Bolivia with about 94% of total emergy inputs from renewable sources, and therefore an economy that is relatively sustainable in the long run, is not competitive in the short run. Emergy per capita may give insight into the well-being of populations. The global average emergy per capita of about 5 E15 sej/capita/yr (Table 2) might be used as a cut-off for current population s well-being. Countries with per capita emergy use less than the global average are probably not providing an adequate resource base for their populations. Per capita emergy use in Bolivia is about half the global average., and is less than 10% of that in the USA. Of all the MERCOSUR countries, Chile enjoys the highest per capita emergy use, followed by Argentina. Average per capita emergy use in all MERCOSUR countries is about twice that of the global average and about 40% that of the USA. The ELR, EYR and ESI for each of the countries of MERCOSUR are given in Table 2. In general, the indices indicate that the countries of the MERCOSUR are intermediate in their load on the environment (ELRs of abut 1.4/1), and their effective use of environmental emergy (EYRs equal to about 1.7/1). The ESI is a ratio that relates the emergy yield to society to the load on the environment that is required to obtain that yield. On the average the ESI for the MERCOSUR countries is about 1.2, while for

8 Table 2. Emergy indices of the MERCOSUR countries (c 1998) Population Percent Emergy/capita ELR EYR ESI (E 6 people) Renewable Bolivia % 2.49E Paraguay % 9.31E Uruguay % 9.63E Chile % 1.89E Argentina % 1.29E Brazil % 1.08E MERCOSUR % 1.1E USA(1998)* % 2.59E World (1995)** % 5.07E * from Rodrigues (2002) ** from Brown and Ulgiati (1999) the USA it is about 0.2 The very high ESI for Bolivia is indicative of an economy that has large renewable emergy flows with very small nonrenewable emergy matching. Paraguay and Uruguay both have ESIs that indicate good sustainability since environmental loads are relatively low and their yields to society are relatively high. While the yields in Chile, Argentina and Brazil are about the same as those in Paraguay and Uruguay, the loads on the environment are higher, thus the ESI for these three countries is much lower. Emergy, Money, and International Trade Table 3 gives several monetary indices for the MERCOSUR countries: Gross Domestic Product (GDP) in billions of US dollars, the Emergy Money Ratio (EMR), and the Emergy Exchange Ratio (EES). The GDP of the entire MERCOSUR economy is about 10% of the US economy and about 3.4% of the global economy. World EMR in 1995 was is about 1.1E 12 sej/$, while the USA had an EMR in 1998 of 0.73/1. The countries of MERCOSUR have EMRs considerably higher than those of the Global economy and the USA. These are average values, but serve instructive purposes. Paraguay has the highest emergy/ money ratio, nearly ten times that of the USA and about 1.5 times that of Chile, the next highest EMR within the MERCOSUR. Argentina has the lowest EMR (1.52 E 12 sej/$). The average EMR for MERCOSUR is 2.8 E12 sej/$ The final column in Table 3 lists the global Emergy Exchange Ratio for the MERCOSUR countries. The global EER is the ratio of the Global EMR to each country s EMR. Relative buying power of a currency is in its ratio to another currency s buying power. MERCOSUR countries all have Global EESs less than 1.0/1 The lowest is Paraguay (0.14/1), which in essence means that on average, Paraguay is at a 7 to 1 disadvantage when trading on the global market. Obviously this is not the case for every trade, but reflects the average conditions. Argentina has the highest global EES, but losses about 1.4 to 1 on average in global trading. Since the relative buying power of a currency when compared to another country s currency is in the ratio of the two countries EMRs, the USA with the lowest EMR enjoys considerable advantage. In essence, since the EMR ratios between Paraguay and the USA are about 10 to 1, it suggests that the USA dollar spent in Paraguay will purchase ten times the average emergy the same dollar would purchase in the US.. In Chile, the ratio is about 6.8 to 1 The trade advantage with all MERCOSUR countries is in the USA s favor ranging from 10 to 1 (Chile) to a low of about 2.1 to 1 (Argentina).

9 Table 3. Emergy, monetary and trade indices of the MERCOSUR countries (c 1998) Total Use (G) GDP EMR Global EER (E 22 sej/yr) (E 9 US $) (E12 sej/$) Bolivia Paraguay Uruguay Chile Argentina Brazil MERCOSUR USA(1998)* World (1995)** * from Rodrigues (2002) ** from Brown and Ulgiati (1999) Within MERCOSUR, trade advantage follows the asymmetry of the economies. Table 4 gives internal EERs, or trade advantages/disadvantages of the MERCOSUR countries. Trade relationships are read as a trade from along the top row, to in columns below. The EER for trade from Bolivia to Paraguay is advantageous to Bolivia at about 2.53 to 1. Further, Bolivia is at a disadvantage when trading with Uruguay since the EER is less than 1.0. Paraguay s trade with other countries of MERCOSUR is always disadvantageous to Paraguay. Argentina on the other hand, enjoys trade advantages with all MERCOSUR countries, ranging from 5 to 1 with Paraguay to about 1.66 to 1 with Uruguay. The EER is calculated on the EMRs of two economies and as such represents the average conditions for trade. Any particular commodity that is traded can have significant variation from the average. For instance, the emergy per dollar of crude oil exported from Argentina in 1996 was about 6.5 times the emergy per dollar in soybeans (1.13E+13 sej/us$ and 1.75E+12 sej/us$, respectively). Thus, as Argentina s exports shift from mainly agricultural products towards emergy-rich minerals and oil (Ferreyra and Brown, this volume), its trade balance can get even worse. Table 4. Internal trade advantage/disadvantage (internal EER) of MERCOSUR countries FROM Bolivia Paraguay Uruguay Chile Argentina Brazil TO Bolivia Paraguay Uruguay Chile Argentina Brazil

10 SUMMARY The members and associate members of MERCOSUR exhibit large differences in their emergy use and emergy signatures. As a result indices of sustainability are mixed. In general, the countries of MERCOSUR are more sustainable within their boarders than the global average sustainability. Their ELRs are lower, their EYRs are higher, and their ESIs are higher (if only by a small margin) With the exception of Bolivia the emergy per capita of each country is higher. By far, Bolivia has the lowest current sustainability, but because of its lower overall development status, it has very high percent of its total economy that is derived from renewable sources. Yet its per capita empower is lower than the global average, leading one to surmise that currently Bolivia is unsustainable as far as provision of basic requirements to its population is concerned. The highest emergy per capita is found in Chile and Argentina. All things considered, Paraguay, has the best overall sustainability. Its emergy per capita is about twice the world average, it has a very low ELR and relatively high EYR, and a high ESI. Unfortunately however, its trade advantages are quite low, suggesting that it exports much more emergy than it imports from trading partners. It is our belief that such trade situations can exist for short periods of time, but if trade is to be sustainable, it must be balanced. An Emergy Trade Policy MERCOSUR, the Common Market of the South, represents a great opportunity for the development of South America. The Emergy evaluation of the countries of MERCOSUR revealed significant asymmetries among its members and associates. Regional policies concerning the trade between MERCOSUR countries should account for these differences. Balancing trade between nations using money does not lead to equitable trade, on the contrary, it causes disparities where the economies with the highest emergy use per dollar of GDP lose in trading relationships with countries having lower ratios. An interesting approach to create fair trade and therefore to make it more advantageous for all countries involved would be to balance trade using emergy. In other words, balance the emergy in exchanges instead of the money. As it now stands, Paraguay stands to lose on each average trade transaction with all other members and associate members. REFERENCES Brazilian Embassy in London Mercosul. Online, ( Brown, M.T Environmental Accounting: Emergy Perspectives on Sustainability, in IICA/ PROCISUR (ed.), Valoracion Economica en el Uso de los Recursos Naturalesy elmectio Ambiente. Montevideo: Procisur. Brown, M.T. and S. Ulgiati Emergy Evaluation of the Biosphere and Natural Capital. Ambio 28(6): Connolly, M. and J. Gunther Mercosur: Implications for Growth in Member Countries. Current Issues in Economics and Finance 7(5); 1-6. Ferreyra, C. and M.T. Brown Emergy Perspectives on the Argentine Economy throughout the Twentieth Century. Proceedings of the Second Biennial Emergy Research Conference. The Center for Environmental Policy, University of Florida., Gainesville: Gudynas, E Sustainable Development Issues in Mercosur. Bridges between Trade and Sustainable Development 4(1)). Online, ( Odum, H.T Environmental Accounting. Emergy and Environmental Decision Making. New York: John Wiley & Sons, Inc. Partenariat The Mercosur. Partenariat Union Europea-Mercosur. Online, ( Rodrigues, G.S SAMeFrame: Sustainability Assessment Methodology Framework. Working paper, Center for Environmental Policy, University of Florida, Gainesville

11 Valente, M Mercosur: Integration, Environment, and Pragmatism. Tierramerica. Online. 8 ( APPENDIX A Further discussion and definitions can be found in Odum, 1996; Brown and Ulgiati, 1997; Ulgiati et al Definitions Emergy / Money Ratio (EMR). The ratio of total emergy flow in the economy of a region or nation to the GDP of the region or nation. The EMR is a relative measure of purchasing power when the ratios of two or more nations or regions are compared. Emergy Exchange Ratio (EER). The ratio of emergy exchanged in a trade or purchase (what is received to what is given). The EER is always expressed relative to one or the other trading partners and is a measure of the relative trade advantage of one partner over the other. Environmental Loading Ratio. (ELR) The ratio of nonrenewable and imported emergy use to renewable emergy use. The ELR is an index of how much load is placed on the local environment of a r process, region, or country. Emergy per capita. The ratio of total emergy use in the economy of a region or nation to the total population. Emergy per capita can be used as a measure of potential, average standard of living of the population. Emergy Sustainability Index (ESI). The ratio of the Emergy Yield Ratio to the Environmental Loading Ratio. It measures the contribution of a resource or process to the economy per unit of environmental loading. In the case of a regional or national economy the ESI relates the national yield ratio to the national environmental loading ratio. Emergy Yield Ratio (EYR). The ratio of the emergy yield from a process to the emergy costs. The ratio is a measure of how much a process will contribute to the economy. In the case of a regional or national economy, the EYR is the ratio of total emergy used by society to the nonrenewable and purchased emergies. Emprice the emprice of a commodity is the emergy one receives for the money spent. Its units are sej/$. Percent renewable emergy (%Ren). The ratio of renewable emergy to total emergy use. In the long run, only processes with high %Ren are sustainable.