energy management :: 2011/2012 economic input-output life-cycle assessment prof. paulo ferrão...

Energy Management :: 2011/2012

Economic Input-Output Life-Cycle Assessment

Prof. Paulo Ferrã[email protected]

Energy Management


Industrial Ecology: Tools

EIOEIO

EIO-LCAEIO-LCA

Hybrid EIO-LCA Hybrid EIO-LCA

Micro-scaleMicro-scale Macro-scaleMacro-scale

EnvironmentEnvironment

EconomyEconomy

MFAMFALCALCA

EcodesignEcodesign

LCAALCAA

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IO Principles

• Idea developed by W. Leontief (Nobel prize in economics in the 70’s)– Extend the ideas of the economic base model by disaggregating production into a set of sectors

Industry

Market

Households

$

$

$

Services Consumption

Exports

Imports

Industrial Sectors

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As part of the establishment of national accounts, input-output analysis was devised in the

1930s, and first implemented in the 1940s for the USA.

Its founder was Wassilyu Leontief (1936), and his approach to national accounts was a

disaggregated one, focusing on how industries trade with each other, and how such inter-

industry trading influenced the overall demand for labor and capital within an economy.

HistoryEcomic Input-Output tables, History

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The basic distinction that is made in input-output analysis is between the demand for goods

and services sold to ‘Final Demand’ (households, governments, exports, investment), and the

‘Total Demand’ in the various sectors, resulting from the direct impact of final demand, and

the indirect impacts resulting from inter-industry trading (intermediate demand).

For instance, almost no iron and steel products are sold directly to domestic consumers (final

demand), but a great deal is sold embodied in manufactured goods, such as cars and washing

machines

Total demand = intermediate demand + final demand

Basics

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Input-Output Analysis

IntermediateInputs

(square matrix)

Primary Inputs

Total Inputs or Total Costs

Con

sum

ptio

n

Tota

l out

put

OutputsOutputs

Inpu

tsIn

puts

SectorsSectors

Sec

tors

Sec

tors

Consumption:

• Demand (families, government);• Exports

Primary Inputs:

• Added value (salaries, profits, …);• Imports;

+ =

+

=

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IO model - Leontief

• W. Leontief (Nobel prize in economics in 70’s)• Part of National Income and Product Accounts• Total Inputs = Total Outputs

Transaction table beetween sectors

Final demand

Total Output

x11 + x12 + x13 + … + x1n + y1 = x1x21 + x22 + x23 + … + x2n + y2 = x2 x31 + x32 + x33 + … + x3n + y3 = x3…………………………………….xn1 + xn2 + xn3 + … + xnn + y3 = xn

Sales

$

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Quadro de transacções

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IntermediateInput (€)

Primary Input(€)

/ TechnicalCoefficient

Matrix(-)

=

Tecnichal Coeficients Matrix

Total Input(€)

IntermediateTechnicalCoefficientMatrix (-)

Primary TechnicalCoefficient (-)

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IO model - Leontief

• If we define an input coefficient aij , that quantifies the output of sector i absorbed by sector j per unit of its total output of sector j

where,

– aij, is the input coefficient of product of sector i into sector j

– xij, is the amount of the product sector i absorbed, as its input, by sector j

– xj, is the physical output of sector j

then

or, in a matrix formYΑXX

j

ijij x

xa

ijiji yxax

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IO model - Leontief

• That is equal to

• Since the final demand is normally exogenous or given, for economic purposes the problem is to calculate the output column vector X. To do that is necessary to pré-multiply the by the inverse of (I-A), commonly referred as the Leonfief inverse, that result in

Where – A denotes the net direct inputs of the coefficient matrix, – A2+A3+…+A∞ are, respectively, the 1st, 2nd, and n tier

indirect requirements of the coefficient matrix.

Α)X(IY

YΑ)(IX 1

YA...AAAIYΑ)(I 321

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Quadro de transacções

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Quadro de coeficientes de Leontief

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One of the main uses of input-output analysis is to display all flows of goods and services

within an economy, simultaneously illustrating the connection between producers and

consumers and the interdependence of industries.

An advantage of input-output tables is that economic components, such as income, output

and expenditure, are presented in a consistent framework reconciling the discrepancies

between the estimates of these components.

Classical uses

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Using linear algebra, input-output analysis allows all economic activity to be directly related

to final demand. Of course, the final demand for the various producing sectors sums to

Gross Domestic Product (GDP), one of the fundamental measures in national

accounting.

Input-output tables can be, and are being, used for various economic analyses within and

outside Government. The use of input-output tables is particularly important for analyzing

structural adjustment in industry.

Uses

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Sector 1 Sector 2 Sector 3 + Exports Consumption = Total output

Sector 1 S11 S12 S13 E1 C1 TO1



+

Added value VA1 VA1 VA1

Imports I1 I2 I3

=

Total input TI1 TI2 TI3

Intermediate Input Final demand

Mathematical formulation of the Input – Output Model

Aij

Matrix of the intermediate Input

Aij

Matrix of the intermediate Input

Yi

Vector of final consumption

Yi

Vector of final consumption

Xi

Vector of total output

Xi

Vector of total output

Aij + Yi = Xi Aij + Yi = Xi

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Macro-Economy Application (example)

Given the following matrix of the intermediate input for an economy with only 3 sectors (Agriculture, Industry and Services), and the respective values for the exports, imports, consumption and added value.

a) Determine the elasticity in the economy for the unitary demand increase in the Agriculture sector.

Macro-Economy Application (example)

Given the following matrix of the intermediate input for an economy with only 3 sectors (Agriculture, Industry and Services), and the respective values for the exports, imports, consumption and added value.

a) Determine the elasticity in the economy for the unitary demand increase in the Agriculture sector.

Agriculture Industry Services + Exports Demand = XAgriculture 5 20 0 20 30 75Industry 20 20 10 30 40 120Services 10 30 20 10 30 100+VA 20 40 30Imports 20 10 40

75 120 100

Intermediate input

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Macro-Economy Application (example solution)Macro-Economy Application (example solution)

A Agriculture Industry ServicesAgriculture 0,07 0,17 0,00Industry 0,27 0,17 0,10Services 0,13 0,25 0,20

I-A Agriculture Industry ServicesAgriculture 0,93 -0,17 0,00Industry -0,27 0,83 -0,10Services -0,13 -0,25 0,80

(I-A)-1 Agriculture Industry ServicesAgriculture 1,14 0,24 0,03Industry 0,40 1,33 0,17Services 0,32 0,46 1,31

a) The elasticity in the economy will be given by X, X = {1.14; 0.40; 0.32 }, 1.86 .

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IO Principles

• Basic assumptions

Main Assumption

The sector produces goods according a fixed production function (recipe)

Simplification But also a limitation

Leontief production functions

Linear production functions

No scale economies

Don’t allow the substitution of production factors

Limits the application scope to few years, where is shown that the “recipe” don’t change much

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IO Principles

• Coefficient matrix

• Leontief Inverse

25,0003,00

07,033,018,008,0

0022,001,0

16,003,0015,0

A

82,112,284,140,1

33,1005,00

18,056,137,015,0

001,028,102,0

31,055,014,023,1

)( 1

smultiplier

AI

The difference between the values is the due to the indirect effect (in this case 0,37-0,18 =0,17)

Direct effect

In the principal diagonal which is > 1, the unit value represents the increase in final demand in that sector, and the remaining (0,33) is the direct and indirect impact of the expansion

Multiplier - Is the column sum, tells that the for an increase of 1 unit value production of that sector, 0,84 worth of activity is generated, for a total value of production of 1,84 (due to direct and indirect effects)

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IO Principles

• Multipliers– Provide an information on the sector impact on the rest of the economy of a unit change in final

demand– Also called the “ripple effect”– Multipliers are explicated upon a domino theory of economic change. They translate the consequences

of change in one variable upon others, taking account of sometimes complicated and roundabout linkages.

– Besides the output multiplier, there are others types of multipliers like the employment and income multipliers

MultiplierMultiplier Is a function of the economical structure, size of the economy and the way exports and sectors are linked to each others

Change over timeChange over regions

The sector importance depends of other factors besides the multiplier

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EIO-LCA

• The environmental extension of the input-output framework is easily done, by only considering that the amount of environmental impacts associated with one industry is directly proportional to is output, in a fixed proportion. Then:

• Where:– b is a q x n matrix which shows the amounts of pollutants

or natural resources emitted or consumed to produce a unit of monetary output of each industry, with

• q rows with environmental interventions (CO2, CH4, etc…)

• n columns with industrial sectors – B is a also a q x n matrix and represents the total direct

and indirect environmental impacts for each industrial sector

YΑ)b(IB 1

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GWG Emissions in the Portuguese EconomyNAMEA

Unidade 10E6 escudos

Sox Nox COVNM CH4 CO CO2 N2O NH3(ton) (ton) (ton) (ton) (ton) (Kton) (ton) (ton)

01 Agricultura e Caça 2595 22843 8042 203083 7923 1464 7885 7807202 Silvicult. E Expl Flor. 176 1555 342144 12 541 92 34 103 Pesca 984 8668 131 529 1094 482 1104 Carvão 25 7 205 Petróleo 53521 7154 54480 4725 1297 2413 11206 Electr., Gás e Água 166933 72807 385 152 2240 16135 21107 Min Fer. E não Fer. 5135 1160 596 55 49677 597 6 1908 Min. não Metálicos09 Porcelanas e Faiança 4451 2689 4417 464 6666 2268 7310 Fab. Vidro e Art. Vid 12084 2184 52 150 583 894 911 Out. Mat. Construção 27320 9531 4713 1003 5967 6502 7512 Produtos Quimicos 4417 3855 773 359 20320 1485 3266 697113 Produtos metálicos 224 253 1052 23 9 46 114 Máq. Não Eléctricas 19 21 173 2 1 415 Maq. Out. Mat. Eléct. 130 147 207 13 5 2716 Material Transporte 69 78 3092 7 3 1417 Aba. Cons. de Carne 667 235 20 24 69 61 118 Lacticínios 1043 368 31 37 108 96 219 Conservação de Peixe 485 171 106 7997 50 141 24320 Óleos e Gord. Alim. 267 94 3050 10 28 2521 Prod.Cereais e Legu. 486 172 1842 17 50 48 122 Out. Prod. Alimentar 2246 793 204 12051 233 351 36723 Bebidas 1482 523 4710 3591 153 213 11024 Tabaco 929 428 9 37 11 70 1

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Evolution of the contribution to the Portuguese GDP of the main economic sectors between 1993 and 1995

1. Agriculture & hunting

2. Petroleum

3. Chemical products

4. Transport vehicles and equipment

5. Textile & clothing industry

6. Construction

7. Restaurants & Hotels

8. Financial services

9. Services rendered for companies

10.Non-commercial services of Public Administration

4.6%

3.8%

4.6%

5.5%

6.6%

3.4%2.9%

4.7%

4.0%

7.1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

1 2 3 4 5 6 7 8 9 10Economic Sectors

% o

f G

DP

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Direct and indirect costs of the most important sectors to fulfil the total demand in 1993 and 1995


2. Construction




6. Non-commercial services of Public Administration



9. Petroleum

10.Restaurants & Hotels

0 1 2 3 4 5 6 7 8 9 10Econom ic Sectors

0

4000

8000

12000

10

6 E

uro

s

Ind irect 93D irect 93

Indirect 95D irect 95

20

2123

19

22

24

3030

68

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GNP and GWP per economic sector for the years of 1993 and 1995


2. Construction




6. Non-commercial services of Public Administration



9. Petroleum

10.Restaurants & Hotels

0 1 2 3 4 5 6 7 8 9 10Econom ic Sector

-40

-20

0

20

40

60

Pe

rcen

tage

G NP & G W P x SectorG N PG W P

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Environmental sustainability of the sectors (increase of GNP versus increase of GWP)

1. Textile & clothing industry2. Construction3. Transport vehicles and equipment4. Agriculture & hunting5. Chemical products6. Financial services7. Services rendered for companies8. Petroleum 9. Restaurants & Hotels

-40 -20 0 20 40% G N P

-40

-20

0

20

40

% G

WP

1

23

4

5

6

7

8

9

Total

Strong Sustainability

Non-sustainable

W eak Sustainability

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OBJECTIVES

• Develop and assess EIO-LCA related tools. to promote fast and accurate life cycle analysis of products and services.

• Analyze a case-study to compare the different tools.

LCA

EIO-LCA

HEIO-LCA

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Hybrid EIO-LCA

• The hybrid Input-Output analysis combines the bottom-up approach of process-based LCA with the traditional top-down economical technique Input-Output Analysis, developed by Wassily Leontief 50 years ago

YAIL

MAbbB

~~

B, is the Total environmental intervention due to external demand

~b, is the environmental flow matrix for process analysis

b, is the pollutant emission per $ of sector output

Ã, is the technology matrix for process analysis, expressed in various physical units per unit operation time for each process.

M, is the foreground system matrix, and represents the total physical output per total production in monetary term. It is expressed in physical flow required to produce $ worth output of each industry.

L, is the foreground system matrix, which represents the monetary input to each sector per given operation time, thus expressed in monetary unit per time.

A, is the matrix of inputs coefficients of traditional Input-output analysis, with n x n sectors.

Foreground

Background

energy management :: 2011/2012 economic input-output life-cycle assessment prof. paulo ferrão...

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