Advances in Energy Studies.
Energy flows in Ecology and Economy.
International Workshop held in Porto Venere (Italy), 26-30 May, 1998.

FINAL DOCUMENT
(as approved by participants in the last day of the Workshop)

OBJECTIVES

Scientists in the fields of Ecology, Energy Analysis and Ecological Economics met in Porto Venere, Italy, during the last week of May 1998 to seek and improve understanding in definitions of scales and boundaries, methods of analysis, policy initiatives and future research needs required to generate a balanced pattern of humanity and environment. The Workshop was intended to sharpen scientific focus and build a critical mass of scientists researching energy issues as societal attention once again shifts toward policy debates concerning sustainable use of resources and energy and their relationship to the economies of humanity.

Within this framework, the goals of the Workshop were threefold:

1. to develop links and encourage "translations",


2. develop common and complementary procedures and


3. suggest joint research pathways, for integrating each other's work.

The Workshop goals were not intended to reduce diversity of scientific descriptions by looking for a unique approache to a complex reality. Rather, participants sought to improve the scientific quality and relevance of a wide variety of approaches, by developing, critiquing, and applying many analysis methods, assumptions, and constraints to diverse problems and situations.

SCIENTIFIC MOTIVATION

During the last two decades, many approaches have been developed in the field of analysis of economic and ecological systems which involve energy assessments. None of them has been able to capture the complexity of problems facing humanity . Therefore, different complementary approaches are very often required by the nature of the problems.

Beginning in the 1960s pioneering work in applying concepts of energy flow to ecological systems laid the groundwork for much of the application to economic systems in the 1980s and 90s. Energy analysis in the 1970s was applied particularly to questions of production process efficiencies, evaluation of alternative technologies and primary energy supplies, direct and indirect energy requirements of production and consumption activities, and supply-side constraints on economic growth. Connections to ecology as well as to environmental concerns were developed at the same time. As the field matured throughout the 1980s and early 1990s, both process analysis and system-based approaches were used to address the physical interdependencies of economic and ecological systems and to appraise development prospects for societies in light of ecological limits.

The experience of the last two decades has shown that this is a complex domain of scientific inquiry because:

• The questions of system change and interdependencies must be addressed at many different spatial and temporal scales which "interfere";



• There exist formidable data requirements which have not historically been supported systematically by official data-gathering and scientific funding agencies;



• Considerable scientific uncertainties about system performance potentials and changes (e.g., costs and yields of new energy-supply technologies, severity of energy-supply problems, ecosystem changes due to anthropogenic greenhouse gas emissions, etc.) are compounded by conflicting views in society about the urgency of environmental and energy supply/demand problems; and



• The inherent complexity of socio economic and ecological systems means that a variety of scientific hypotheses, approaches, and methods of analysis may be appropriate, depending upon the scales of inquiry and the aspects of system change being explored.



• Appraisal of scientific quality and relevance of results in public policy contexts must begin with recognition of these inherent degrees of complication.

MAIN POINTS ADDRESSED

1. Importance of energy to society

   In all types of economies since 1900, growth, domestic product, and measures of social well being are strongly related to use of energy.

   Economic price does not adequately address the importance of energy to the economy . Dealing with energy inputs to processes evaluated solely by their price does not recognize the pivotal role of energy in economies and seriously undervalues its importance. Traditional economic theory disregards the importance of energy, because it postulates that the contribution of energy to economic growth is essentially determined by the low (roughly 5%) share of energy cost in the total cost of capital, labor, and energy.

   Even if the cost of energy cannot be neglected, being one of the driving forces in the economic process, a parallel growth of attention to the biophysical aspects of the economy is urgently needed, in order not to misjudge the role of energy in intensifying processes with increasing automation, where energy-driven machines replace human labor.

   There are significant differences in quality and quantity between energy flows from: (i)renewable sources, (ii) nonrenewable stocks of fossil fuels and other minerals, and (iii) slowly renewable stocks of organic matter (in the form of vegetable and animal biomass), water, etc. in their current and potential contributions to society.

   Some participants in the Workshop suggested there are no binding energy-supply constraints in the near term, but rather the concern is with current limits on technology.

   Others suggested that all energy provision has both an energy and environmental cost and that many sources thought to be potential sources of energy for society will prove not to yield net energy.

   Increases in energy efficiency tend to increase energy use by increasing throughput. This "Jevon's Paradox" or rebound effect operates dynamically, cannot be seen in static analyses, and is not well understood by most policy makers and citizens.

2. Recognition of limits to global carrying capacity

   Participants felt that questions of global carrying capacity are of paramount concern and that energy analysis offers important perspectives that should not be ignored by world populations and their leaders.

   Sustainability is very often an elusive concept whose definition in both space and time may vary according to the different disciplines and points of view. Energy analysis may therefore offer quantification of biophysical constraints as a basis of real policy options for achieving sustainable economies.

   The scientists and economists who took part in the workshop recommend to world's Governments the rapid definition of a juridical framework for "Natural Patrimony" which will give the environment appropriate standing within the law.

3. Failings of neoclassical economics

   Neoclassical economics (NCE) does not deal adequately with externalities such as environmental contributions, waste recycling, and resource values. In addition it lacks an adequate scientific and theoretical basis to address intergenerational equity, equitable international exchange, or equitable allocation of resources between economic classes.

   The following points concerning neoclassical economics were discussed at length:

   1. Conventional NCE is separated from biophysical reality. Economic systems are a form of natural ecosystems that function because of energy and material fluxes and transformations. Energy and other biophysical resources are exploited to make economic activity happen. The biophysical basis is the driving force of the economic system. The NCE representation of economies fails to capture the biophysical reality of the actual systems and as such is unconstrained by laws of thermodynamics and conservation of matter, not to mention more prosaic concerns of pollution, resource quality, and the systemic characteristics of economic/ecologic interactions. This is reflected in the "perpetual motion machine" caricature of the interaction of firms and households in the basic NCE diagram which is clearly and simply at variance with reality.
   
   
   
   2. Conventional NCE is rooted in individual preferences and does not deal with collective preferences.
   
   
   
   3. Neoclassical economists assert that NCE deals with the parts of reality that are important to humans. But human concerns largely exceed what NCE considers and therefore additional, biophysical considerations are urgently needed.
   
   
   
   4. Conventional NCE cannot deal well with critical time-dependent issues such as depletion of resources or changes in the global life-support system. For example, NCE does not account for large scale resource depletion, climate change, sea level rise, soil erosion and other issues critical to human well being, and it will continue to ignore them until an appropriate economic signal (price) suggests otherwise.
   
   
   
   5. For many small scale decisions and routine market activities, the neoclassical model is useful and appropriate even if inadequately formulated. However, for larger scale issues including broad spatial and time scale questions, the NCE model fails completely to capture the biophysical basis that allows any economy to function.
   
   
   

   An alternative approach is clearly needed. Attempts to attribute economic value to uncertain, irreversible "externalities using willingness to pay, contingent valuation, or similar methods are unconvincing. However, energy analysis (in all its various forms) may help to expand the scope of economics, and move it away from a single numeraire or unique standard of valuation, toward a multicriteria framework. No fully developed alternative exists now, but important steps are being made by a number of investigators starting not from human desires and preferences, but from a biophysical reality. It is hoped that this biophysical approach can be merged with some useful components of neoclassical and classical economics to generate a system of economics adequate to meet contemporary challenges.

   In essence, neoclassical economics is an inadequate tool for the analysis of large scale economic issues, and decision makers and the general public do not have a clear understanding about the degree to which many scientists have extremely serious reservations about the NCE paradigm.

4. Complementarity of Approaches

   Perspectives on values in respect to sustainability must emphasize requirements for permanent renewal of economic and ecological systems in dynamic interdependencies. This requires evaluation perspectives seeking to illuminate and measure empirically the requirements for long-run sustenance of human societies together with their ecological contexts. Energy based analyses of linked economic-ecological systems represent a powerful array of methods for this urgent investigation.

   Assessment of the biophysical capacity of the earth's systems is fundamental to any analysis of the world's energy future. The distribution of the earth's resources is inherently spatial. Geographic modeling and the coupling of spatially referenced data, such as that acquired and stored by geographic information systems, with temporally based computer simulation models of ecosystem behavior is an important tool to develop for assessment of the world's carrying capacity. It would provide planners and policy makers a means for estimating over time and at a variety of scales (local regional, national, and global) the potential capacity of land to support many energy related options including agricultural production, carbon and pollutant absorption, water storages, and soil conservation.

   Modeling complex systems by means of energy and other biophysical numeraires is highly recommended. The state-of-the-art of modeling is continually improving, but there are many basic issues still to be resolved to make modeling a more integrative and predictive tool. Many models and modeling approaches already exist that, with modification, could serve the purposes of energy analysis.

METHODOLOGICAL ISSUES

A variety of methodological issues were discussed at the Workshop. These included the following:

• Diversity of approaches - There is a need for a spectrum of methods based on differing system scales, situations, and assumptions to address society's sustainability concerns. Rather than limit the diversity of approaches, it is desirable to recognize and seek ways to enhance their complementarity.



• Values paradigm - Dealing with questions of the appropriate "fit" of humanity into the biosphere will require a paradigm shift in the value structures of civilized societies. Different criteria for value assessment have been suggested to integrate market and other values. Among others, longer time horizons, renewability, awareness of scarcity, demand for environmental support, and donor-side versus user-side approaches. Participants recognized that this crucial issue requires a further joint research at the interface of relevant disciplines.



• Quality of energy and material resources - There are intrinsic qualities (in terms of role in the ecosphere dynamics as well as potential applications) to energy, resources, and land, that are independent of their instrumental utility or thermodynamic properties.



• Hierarchical organization of systems - Systems of the ecosphere, at all scales are organized hierarchically. This was suggested as a general organizational principle of all systems that may provide deeper understanding of emergent properties and processes.



• Goal functions - Several hypotheses were suggested as energy related goal functions, including: maximize empower (emergy per unit time), maximize storage, maximize useful exergy. While it is believed that such goal functions are not scale dependent, research is still needed to confirm and compare them at different space-time scales.



• Scales of analysis - It was agreed that relevant scales include all systems of the ecosphere, from global biogeochemical systems to thermodynamic heat transfers within heat exchangers.



• Systems thinking - A systems approach is essential to account for total values (both externalities and "internalities") in economic and ecological contexts. Systems or network diagrams should be employed in energy analyses to help clarify complex interrelations and enhance understanding.



• Systems science - There is urgent need for further development of the science of complex adaptive systems. Many participants felt that basic understandings of natural and human complexity were not yet within the grasp of science, and that further effort is needed to produce such understanding which underlies the man-in-nature relationship. Complex adaptive systems knowledge must be developed as further capital for sustainable optimization of this relationship.



• Indices to reduce complexity and influence policy - There is a need for basic indices to simplify reality, facilitate sharing and comparing of results, broaden the scope of understanding, and communicate to more general audiences. Economic, energy and environmental impact analyses should be made and comparative indices developed, in order to fully understand the relationship of resources to the economy.



• Explicit statement of boundaries - There was a strong consensus that spatial and temporal boundary conditions must be explicitly understood and stated in any analysis.



• Terminology - To avoid a chaos in terminology rigorous definition of terms is required. This is the only way to ensure that the developing field of biophysical analysis will be practical and usable.



• Policy relevance of evaluations - A "policy aspect" should be included in evaluations and results should be expressed as policy alternatives to help guide policy debates and decision making.

RESEARCH QUESTIONS

A challenge to energy analysis in coming years will be to reframe in a structural ecological-economics perspective the insights from analyses previously conducted with an emphasis on a single economic system open to the environment as both a source and a sink.

The basic idea should be to match the life-cycle dynamics of human development at different scales to the natural dynamics of renewable and nonrenewable resources at those scales.

It is imperative that cross-comparison analyses be performed using different approaches to elaborate differences, similarities, and scales of applicability of each distinct methodology.

Projects are needed that directly illuminate the policy relevance and implications of energy analysis to sharpen the focus and orient the field to provide guidance to the decision-making system.

Several specific research projects were discussed by the participants:

• A high priority project is to evaluate three types of systems with diverse scales using various approaches. The systems discussed, at increasing scales, were a technical thermal process, an ecological system, and a national economy;



• A project to address assumptions and methodologies involved in such issues as factoring the environment (as both a source and sink) and human labor into analyses.



• A project to determine quality indicators and process convergence factors (like the transformities in the emergy metric) to establish ranges of variation and confidence in policy inferences.



• A project to research fundamental questions of the carrying capacity of regions and the biosphere and how the summed effects of human endeavor at regional and global scales compares with this.



• A project to explore the relationship between energy and money flows in economies to obtain better understanding of inflation, trade advantages, taxation policies, and economic incentives.



• A project that explores the relationship of trade to economic and environmental degradation in developing nations; and finally



• A project to address the role of conservation protocols and alternatives in long term energy policies.

SUMMARY

In all, while consensus was sought between divergent but complementary approaches, there was far more discussion than consensus. Of primary interest and concern by nearly all participants was the need to obtain better understanding of the application domain of each of the various approaches. During the discussion, it became obvious that between now and the next Advances in Energy Studies Workshop, to be held in the year 2000, it will be necessary to illuminate these differences. Agreement between several participants to work on common analyses was reached and it was planned to begin immediately. This is an important first step in developing the complementarity required to address the multifaceted problems facing humanity.

Numerous issues more related to social and philosophical subjects than to energy analysis, per se, were discussed because it became evident that they were extremely important to participants. These included national accounting procedures that consider resource depletion and environmental degradation, and questions concerning growth, carrying capacity, sustainability, and inter- and trans-generational equity. These were in the forefront of the issues that participants strongly suggested should be addressed by each of the various approaches to make energy analysis pertinent and policy-relevant in the coming years.

Sergio Ulgiati ulgiati@unisi.it
(on behalf of the Organizing Committee)