Eco-efficiency

Modelling Eco-efficiency and Sustainabilty of the Austrian Economy

This project, supported by the Jubiläumsfonds der Österreichischen Nationalbank, showed the importance of integrating physical flows in disaggregated economic modelling frameworks in order to adequately consider the relationship between the economic and the natural system.

On a scientific as well as a political level, there is wide consensus today that the concept of sustainable development requires integrated approaches to illustrate the interactions between economic, social and environmental concerns. Input-output analysis is regarded as an appropriate framework to provide a comprehensive picture of these linkages as it allows combining bio-physical and social data with economic (monetary) input-output models.

The interrelations between the economic and ecological system affect the flow of material inputs and outputs in many forms. Environmental degradation depends considerably on input quantities, which are taken from and transferred again to the environment in form of emissions and wastes. For the description of these relationships the concepts of “industrial metabolism” and “societal metabolism” are important. These terms refer to the exchange of materials and energy between ecological and socio-economic systems. According to these concepts physical indicators can be differentiated with respect to input and output indicators. The material input of a national economy is frequently regarded as a substantial indicator for environmental sustainability. The decrease of material flows and their decoupling from economic growth represent central goals of the Austrian strategy for sustainable development. Referring to the output side, CO2 emissions reflect the most dominant output flow, showing a still increasing pattern in Austria, which clearly conflicts with the Kyoto goal of a reduction of greenhouse gases by 13% below 1990 levels by 2008-2012 for the Austrian economy. Therefore the Austrian sustainability strategy also demands climatic protection and thus the reduction of CO2 emissions as the most important greenhouse gas. On the basis of these guidance goals fixed in the sustainability strategy, this project examined which economic activities are directly as well as indirectly responsible for the material input and CO2 emissions of the Austrian economy.

By using data on material input on the one hand and CO2 emissions (undesired outputs) on the other hand we connect both an input- and an output-based indicator with an input-output model (based on make-use tables) in order to illustrate the interactions between environmental and socio-economic trends of the Austrian economy. This modelling approach allows accounting for flows of environmental commodities from the environment into the economy and of emissions and waste products from the economy back to the environment.

In addition to the sustainability goals from an environmental point of view we refer to a high employment level, as one important aim for social sustainability in order to consider at least one essential aspect of social equality, by integrating employment in our model as social indicator. The parallel analysis of employment, environment and economy within the make-use-framework allows the comprehensive assessment of the considered indicators related to production and consumption activities of the Austrian economy. This analysis is supplemented by an evaluation of the sustainability of the Austrian economy by applying minimum conditions for sustainable development. With the help of this framework we investigated if the development of the Austrian economy fulfilled these minimum conditions in the time period 1995 to 2000.

The minimum condition for ecological sustainable development demands an absolute decoupling (dematerialisation) of material flows or CO2 emissions from GDP grows. Therefore it requires that the growth rate of GDP has to be smaller than the increase in resource productivity. The results of the analysis showed that the necessary requirements for sustainable economic development were not fulfilled for the time period 1995 to 2000 for the Austrian economy. The necessary absolute decoupling of resource use and CO2 emissions from GDP did not occur.

The minimum criterion for social sustainability demands that the number of people employed L increases only if during a given period the economy grows faster than the average production per capita. This criterion is fulfilled for the entire Austrian economy. The criterion for social sustainability is fulfilled for the entire Austrian economy. However, the data for employment only relate to the number of jobs comprising self-employed persons and employees without considering the occupational breakdown or qualitative pattern. From a sustainability perspective an extended definition of the term “labour” itself is necessary, which comprises, in addition to the usual gainful employment, caring work, voluntary work in the community and parts of work as self-provider. Providing insight in these issues would significantly enhance the evaluation of social sustainability, but at the time being, the necessary data are not available in Austria. Still, the reduction of the unemployment rate can be regarded as an adequate indicator for social sustainable development, because formal work (traditional jobs) do play a role also in the concept of “mixed work” in the sense that people should work still in the formal economy (probably less hours per year on average) while working additionally in the informal sectors.

The accuracy of data used, and the underlying assumptions considered may lead to different kinds of errors. Therefore, the results only provide rough estimates of the past development of material use, CO2 emissions and employment in Austria.