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OCR for page 17
2
Material Flows Accounting Definitions
and System Structures
n its simplest sense, material flows accounting is a method for tracking
the movement of matter into and out of a system of interest from and
to the environment, using methodically organized accounts, and de-
noting the total amounts that remain in the system to create a stock. For
clarity (adopted from Eurostat, 2001), material inputs to a system gener-
ally include all solid, liquid, and gaseous materials that enter the economy
for further use in production or consumption processes. The materials
may or may not be toxic or hazardous in nature, or potentially so, and the
flows may range from very large to trace levels. Outputs to the environ-
ment generally include all materials that flow into the environment from
the system either during or after production or consumption processes.
One of the purposes of establishing a material flows accounting system is
for examining flows to achieve a mass balance for one, some, or all mate-
rials of interest, which requires memorandum items for balancing. Memo-
randum items are generally associated with an accounting system and
would include, for example, the input of oxygen for combustion and
biometabolism, the input of water for evaporation by animal and human
metabolism, the output of water vapor from combustion, and the output
of water evaporation from animal and human metabolism.
The system may be defined at various levels. For example, there can
be national accounts for tracking flows at the level of a national economic
system, comparable regional or state accounts, and corporate or even fa-
cility-level accounts defined in terms of the corporate or facility bound-
aries instead of geopolitical boundaries. However, there are different defi-
17
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8
MATERIALS COUNT
nitions and interpretations of material flows accounting, and it is impor-
tant that appropriate terms be defined and used.
Confusion about terms will too easily translate into confusion about
the nature of data collection and general program development that is
being recommended by the committee. Clear definitions are also impor-
tant to distinguish the accounting function from the use of data in mate-
rial flows analysis the subject that tends to dominate the literature. With-
out clear definitions of the various levels of material flows accounting, it
would be difficult to properly structure a detailed discussion of benefits,
reach conclusions, and make recommendations. This chapter therefore
begins with an examination of existing definitions, before focusing on pro-
posed definitions and a conceptual framework for use in the United States.
ACCOUNTING VERSUS ANALYSIS
Material flows data are often organized into accounts (e.g., flows of
individual materials, flows in an industrial sector) that serve as the struc-
tured, formal repository of targeted data, making them accessible and use-
ful while preserving this integrity through agreed accounting principles
and practices. Whether considering national, regional, company, or facil-
ity-level accounts, material flows accounts provide the basis for tracking,
comparing, and managing operational and environmental performances.
On a theoretical basis when material flows are organized into ac-
counts, they are in some senses similar to financial accounts, a routine
part of the business of corporations, governments, and organizations of
all kinds. Financial accounts include information such as the balance be-
tween revenue and expenses, cash flow, reserves, and competitive finan-
cial position, and generally accepted accounting practices and definitions
govern them. Decision makers rely on this information so heavily that our
modern world is essentially unthinkable without it. Important trends in
the economic or financial status of individuals, businesses, regions, states,
countries, and coalitions (e.g., European Union) can be tracked accurately.
As with financial accounts, material flows accounts include inputs, out-
puts, and accumulations in stocks and could, if implemented through
well-defined procedures, become critical for calculating mass balances for
targeted systems, creating trends in various derived indicators, planning
public policy initiatives, and making decisions on key public policy is-
sues. As with financial accounts, national and international agreements
could be developed for populating, reporting, and auditing material flows
accounts.
Material flows analysis, in contrast, most often deals with specific
problems, regions, or materials, which means a much more focused ap-
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MATERIAL FLOWS ACCOUNTING DEFINITIONS AND SYSTEM STRUCTURES
19
preach. The work of the U.S. Geological Survey provides many examples
of regional studies, including material flows research programs on aban-
doned mine lands, wetlands loss studies in the oil fields of south Louisi-
ana, and natural resources damage assessment studies in Texas (Brown et
al., 2000~. Other excellent examples of substance-specific analyses are
those dealing with arsenic, lead, and mercury, referenced elsewhere in
this report.
"Inherent in materials flows analyses is the need for reliable, consis-
tent data" (Wagner, 2002~. The presumption is that good material flows
analyses are dependent on good data being captured and maintained in
material flows accounts. Ultimately the usefulness of material flows analy-
ses depends directly on the quality of material flows accounts.
EXISTING DEFINITIONS
Three useful sources of definitional information are the New lersey
INFORM report, Tracking Toxic Chemicals: The Value of Materials Account-
ing Data (Dorfman and Wise, 1997~; the international collaborative study
on resource flows, Resource Flows: The Material Basis of Industrial Economies
(Adriaanse et al., 1997~; and the European Union methodological guide
for economy-wide material flows accounts, Economy-wide Material Flow
Accounts and Derived Indicators: A Methodological Guide (Eurostat, 2001~. In
this section, these sources are used to highlight definitional distinctions
and related issues relevant to this study.
INFORM Report
New lersey established a material tracking database, rather than a
material flows accounting system, for toxic chemicals as a result of the
1984 Worker and Community Right to Know Act (P.L. 1984, c. 315, N.r.S.A.
34:5A-l.1 et seq.~. This law required facilities to report quantities of chemi-
cals transported into or out of a manufacturing facility, chemically con-
verted in the production process, stored on-site, or generated as waste
either to be released to the environment or transported off-site for recy-
cling, treatment, or disposal. New Jersey's law requires reporting of the
same substances as the U.S. Environmental Protection Agency's Toxics
Release Inventory, but with considerably more detail regarding the flow
characteristics (Sidebar 2.1~. Materials tracking under this requirement can
be described as a systematic tracking of raw materials and products as
they move sequentially from one end of a facility to the other (Dorfman
and Wise, 1997~.
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20
MATERIALS COUNT
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~~[ F[~ ~CCO~G DEWS ~~ Saw SIRES 21
Energy
t ~ Recover
~ red
Bought \
On-S11n /
~ ~ ~ .
Starting inventory )
P~u~d
I 11 1j Consumed
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22
MATERIALS COUNT
International Collaborative Study on Resource Flows
Responsive to the pressures of population growth and related eco-
nomic, social, and environmental issues, an international collaboration
evolved among Dutch, German, Japanese, and U.S. research institutes
(Netherlands Ministry of Housing, Spatial Planning, and the Environ-
ment; Wuppertal Institute; National Institute for Environmental Studies;
and World Resources Institute, respectively). The report Resource Flows:
The Material Basis of Industrial Economies (Adriaanse et al., 1997) was writ-
ten in an attempt to find "broadly acceptable new approaches and power-
ful new insights that can stimulate the global transformation" of societies.
In their joint work, the collaborators defined terms relating to mate-
rial requirements in national economies, suggesting a set of physical ac-
counts paralleling conventional national economic accounts. These terms
include hidden flows, direct material input, and total material require-
ment. Hidden, often called indirect, flows are comprised of excavated
and/or disturbed material flows and ancillary material flows, both of
which are also defined. The group did not explicitly define a material
flows account, or accounting, but the definitions provided set the stage
for those subsequently developed as part of a European Union material
flows accounting program.
European Union Guidelines
The European Union (KU) participates in a number of EU-wide and
international environmental accounting activities. As a response to the
policy demand for resource use indicators, Eurostat has developed a
framework and guidance for establishing material flows accounts and
material balances for the economy (Eurostat, 2001) (Sidebar 2.2~. Repre-
senting a synthesis of already implemented material flows accounting
systems among European Union member states, the guide is the first step
toward uniform terminology, concepts, and a set of accounts and tables.
The European Union guidelines describe the key terms as follows:
· Economy-wide material flows accounts and economy-wide mate-
rial balances ". . . show the amounts of physical inputs into an economy,
material accumulation in the economy and outputs to other economies or
back to nature. . ." (Eurostat, 2001~.
· Physical input-output tables are ". . . the most comprehensive de-
scription of material flows between environment and economy as well as
within the economy, distinguishing not only categories of materials but
also branches of production" (Eurostat, 2001~.
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MATERIAL FLOWS ACCOUNTING DEFINITIONS AND SYSTEM STRUCTURES 23
input
domestic \ _
extraction: \ _
· fossil fuels
· mi nerals
· hi amass
unused domestic
extraction
| imports
economy output
material accumulation
(net addition to stock)
material throughput
(per year)
to nature: \
· emissions to air \
· waste landfilled >
· emissions to water /
· dissipative flows /
unused domestic
extraction
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24
MATERIALS COUNT
The following is especially critical to the committee's understanding
of the European approach to material flows accounting and to the defini-
tions proposed for use in the United States (Eurostat, 2001~:
Only flows are counted that cross the system boundary at the input side
or at the output side. Material flows within the economy are not pre-
sented in economy-wide MFA [material flows accounts] and balances.
Therefore, inter-industry deliveries of products, for example, are not de-
scribed. However, they are described in Physical Input-Output Tables.
A later section contains the more explicit statement that "in economy-
wide MFA the whole economy including production and consumption
activities is a single black box. Only flows that cross the system boundary
of the economy are recorded" (Eurostat, 2001~.
In summary, the European Union makes a distinction between mate-
rial flows accounts and physical input output tables:
· Material flows accounts cover flows into and out of the economy as
a whole as well as accumulations.
· Physical input-output tables cover all of the flows internal to the
economy as well as flows between the environment and the economy.
PROPOSED DEFINITIONS
The New lersey, European Union, and other materials examined by
the committee use the term material flows accounting to refer to methods
for tracking the movement of materials from and to the environment, into
and out of systems at various levels, from the nation to the facility. Care
should be taken not to infer more than is meant by the term. There is no
universally understood, more specific meaning for the term. To be more
specific, a modifier, such as economy wide should be used, thereby mak-
ing clear the boundaries and probable content of a given material flows
account.
nology:
The committee agrees on the following definitions and general termi-
1. Use terms such as "material flows accounting" and "material flows
data," when writing generally about tracking material flows in physical
terms.
2. Attach specific modifiers, such as "economy-wide," "national,", or
"regional," to clearly define the boundaries for a specific set of material
flows accounts.
3. Adopt the "black box" approach to material flows accounts for a
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MATERIAL FLOWS ACCOUNTING DEFINITIONS AND SYSTEM STRUCTURES 25
specified system (i.e., national, regional, or other specific system for which
accounts are developed).
4. Use the physical input-output table terminology for material flows
accounting within a system. This matches the economic input-output table
terminology already in widespread use, making it easier to discuss the
relationships between these two approaches to the same subset of flows.
It also avoids confusion about the level of accounting data to which a
. . . .
given passage IS relerrmg.
CONCEPTUAL FRAMEWORK
Consistent with the Eurostat conceptualization of material flows ac-
counts on an economy-wide basis (Eurostat, 2001, Figure 1, p. 9), the basic
material flows concept is illustrated in Figure 2.1 for a generalized sys-
tem. The figure shows the extraction of materials from the environment
that flow directly into the economy or system of interest; material flows
across the boundary of the system in the form of imports and exports;
flows back to the environment in the form of emissions to air, water, and
land; and the accumulation of material stocks. Stock accumulation can
take any of a large variety of forms, from buildings to cameras, with mate-
rials routinely flowing into and out of the stock. Recycling and reuse rep-
resent a specific subset of material flows that contribute to maintenance of
the stock of a material, without requiring additonal extractions or inflows
of that material.
The figure also shows indirect, or hidden, flows associated with ex-
traction, imports, and exports. As noted previously, hidden flows are com-
prised of excavated and/or disturbed materials and ancillary material
flows that are ignored in economic flows accounts because they do not
have economic value. An example of a hidden flow is the relocation of soil
and rock strata that overlay a mineral deposit. The material must be re-
moved before the ore can be extracted and used. The inclusion of such
indirect flows is an important aspect of material flows accounting the
focus is on all material flows, not just those with economic value. This is
the case even for imports, where the indirect flows are incurred outside
the system.
The task of material flows accounting is to track all of these flows at a
reasonable or practical level of detail for the system of interest. The feasi-
bility of details may be related to the cost-benefit analysis of undertaking
the effort, the adverse or beneficial impact on public health or the envi-
ronment, or another rational evaluation. National accounts tracking these
flows can be linked to form global accounts, just as regional accounts can
be linked to trace flows through the national system more precisely.
As noted earlier, material flows accounts are distinguishable from
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26
DOM ESTIC
EXTRACTION
Direct
Indirect
IMPORTS
Direct >
Indirect
MATERIALS COUNT
SYSTEM BOUNDARY
A
/ Stock \
/ Accumulation\
Emissions
tft
lit
Emissions to
water and land
EXPORTS
Hi rant
indirect
FIGURE 2.1 The basic concept of material flows as related to adopted definitions.
physical input-output tables, which give details on physical flows among
and within sectors in a system of interest. Physical input-output tables, in
turn, can be linked with economic input-output tables, which track only
the economic flows or exchanges within the system in monetary terms
(see Chapter 3~. For example, an economy-wide material flows account
for copper might trace the following:
· the flow of copper into the national economy as domestic input
(e.g., from an Arizona copper mine) or through imports (e.g., from Chile);
· related hidden or indirect flows (e.g., overburden removed during
mining and the waste portion of copper ore) and emissions (e.g., to air,
from mine roadways, mill operations, refining);
· the totals that remain in the stock of products (e.g., autos), without
distinguishing the products; and
· flows out of the economy as exports (e.g., in the form of finished
products containing copper).
In contrast, a physical input-output table for copper would trace the
following:
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MATERIAL FLOWS ACCOUNTING DEFINITIONS AND SYSTEM STRUCTURES 27
· flows of copper into and within the national economy from foreign
or domestic sources, including hidden or indirect flows;
· the use of copper on a sector-by-sector basis (e.g., by the automo-
tive industry, by the producers of wiring);
· flows from one sector to another through economic transfers (e.g.,
sale of wiring to the automotive industry), recycling, or reuse; and
· flows out of the economy, including hidden or indirect flows.
The corresponding economic input-output table could trace the fol-
lowing more restricted set of transfers:
· transactions covering the sale of copper among extractors, refiners,
and basic processing or fabricating operations;
· sales of semi or fully manufactured copper products to final prod-
uct manufacturers (e.g., sales of copper wire to the automotive industry,
at which point copper is likely to be only one component);
· sales of final products (e.g., autos to consumers, at which point
copper is likely to be a minor component); and
· possibly the sale of salvaged copper to refiners or other users.
The general relationship between material flows accounts and physical
input-output tables is illustrated in Figure 2.2 by superimposing a grid
1
System Boundary t
. ~ ..
Physical Input-
Output Table
FIGURE 2.2 Relationship of physical input-output tables to material flows ac-
counts. The major arrow and triangle figures represent the same entities as shown
in Figure 2.1.
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28
MATERIALS COUNT
pattern representing the physical input-output table within the bound-
aries of the system of interest. The major arrow and triangle figures repre-
sent the same entities as shown in Figure 2.1.
The input-output tables would in reality be made up of many matri-
ces, with rows and columns capturing the flows within and across sectors.
For example, one subtable of a full physical input-output table could show
the flows of individual nonferrous metals to various sectors and to
branches within a sector; the flows of products containing the metals be-
tween sectors and as final products for consumption; and the flows of
residuals to air, land, and water. Other subtables would cover flows of
biomass, construction materials, fossil fuels, and ferrous metals. In short,
physical input-output tables could show either the relationships across
sectors and/or branches of the economy or among material groupings
(i.e., materials used to produce other materials).
Like a material flows account, a physical input-output table covers
hidden or indirect flows as well as flows that have monetary value. In
contrast, an economic input-output table covers only those flows that re-
flect measurable economic transfers and would therefore correspond or
map to only the portion of the physical input-output table that represents
economic flows (Figure 2.3~. Other parts of the physical input-output table
0000 -— — .
~ E.co.n.o-m..ic...:-...~--np.u-t-
... - -- - - - ---- - -- ::- --
OutputThbl~e
Phvs-i~cal.-..l-n.l3...ut-- ~
- . ~ .
Outout Table
System Boundary ~ .
m
FIGURE 2.3 The relationship among economic input-output tables, physical
put-output tables, and material flows accounts. The major arrow and triangle fig-
ures represent the same entities as shown in Figure 2.1.
1n-
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MATERIAL FLOWS ACCOUNTING DEFINITIONS AND SYSTEM STRUCTURES 29
represent the hidden flows and the outputs of residuals and pollutants
from the economy to the environment. In addition, a physical input-out-
put table can capture flows of natural materials through natural processes,
including the "grand cycles" of water, nitrogen, phosphorus, and other
materials through the natural Earth system.
The linkages between the economic and physical input-output tables
represent both an important way of describing the implications of mate-
rial flows for economic systems and an important research agenda. The
research agenda is especially critical because conventional economic mea-
surement and tracking account for a relatively small proportion of total
flows, whereas it is the total flows that go to the heart of economic, envi-
ronmental, and social sustainability. Research issues are presented com-
prehensively in Chapter 7.
DETAILS OF ACCOUNTING SYSTEM STRUCTURE
Beginning with Austria, the structure of economy-wide material flows
accounts has been explored in Europe since the early 1990s (Steurer, 1992~.
A parallel effort was pursued in Japan during the same period (Japanese
Environmental Agency, 1992~. In ensuing years, similar developments
occurred in seven other European Union countries, and the efforts have
culminated in the drafting of a European Union guidelines document
(Eurostat, 2001), which synthesizes among member states a formal struc-
ture for system accounts and procedures for using them.
In the United States, New Jersey implemented a materials tracking
system focused on toxic materials, expanded beyond Environmental Pro-
tection Agency's Toxics Release Inventory, and Massachusetts imple-
mented a system that collects data that give "the most complete picture of
the conditions of use of a chemical at a facility, obtaining a description of
each process (production unit), the range of amount of chemical use, and
the percent change in waste by process, instead of facility-wide reporting
as in New Jersey" (Dorfman and Wise, 1997~. From these global efforts,
significant insight into the structure of material flows accounts for effec-
tive use can be gleaned, and the details of two structures developed thus
far are presented next.
European Union System Structure
The detailed structure of proposed material flows accounts, a synthe-
sis of approaches by member states of the European Union for eventual
standardization, is presented in Chapter 3 of Economy-wide Material Flow
Accounts and Derived Indicators: A Methodological Guide (Eurostat, 2001~. In
preparing to develop material flows accounts, the structure is defined by
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30
MATERIALS COUNT
a detailed classification of material inputs (Appendix C), of material out-
puts (Appendix D), and material stock changes (Appendix E).
Inputs to the economy-wide system include domestic extraction from
the environment of fossil fuels, minerals, and biomass (used and unused
[i.e., hidden flowed; imports of raw materials, semi-manufactured prod-
ucts, finished products, other products, packaging material, and waste
imported for final treatment and disposal; and indirect flows associated
with imports (raw material equivalent of imported products and unused
extraction of imported products. Memorandum items for balancing in-
puts are included. Each of the aforementioned categories is broken down
into greater detail, as shown in Appendix C.
A similar breakdown applies to material outputs (shown in Appen-
dix D). Included are emissions and wastes to air, land, and water; dissipa-
tive uses of products and other dissipative losses; exports (same as for
imports); disposal of unused domestic extraction; and indirect flows asso-
ciated with exports. Memorandum items for balancing are also included.
Changes to stock are similarly defined, with details shown in Appen-
dix E. Total additions embrace infrastructure and buildings, machinery,
durable goods, and so forth. Removals similarly embrace infrastructure
and buildings, machinery, durable goods, et cetera, but include dissipa-
tive losses. Net additions to material stock are total additions less
removals.
Because of the enormity of water flows, Eurostat recommended that
accounts for water flows be done separately, except for water contained
in materials to attain balanced flows. Air was treated similarly, using it
to complete material balances under combustion or oxidation situations.
Since recycling data are sparse at present in the European Union, Eurostat
recommended establishment of subaccounts, which may be implemented
in material balance calculations when the accounts are sufficiently
developed.
New lersey System Structure
New lersey's law, mentioned earlier, requires reporting of facilities
for chemicals at threshold levels similar to reporting requirements under
the Toxics Release Inventory. New lersey facilities have expanded annual
reporting, forming a material tracking database, that encompass the fol-
lowing data elements for chemicals that must be reported under the Toxics
Release Inventory:
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MATERIAL FLOWS ACCOUNTING DEFINITIONS AND SYSTEM STRUCTURES 31
Inputs
Starting inventory
Brought on-site
Produced on-site
Recycled on-site
Outputs
Consumed
Non-product output
Shipped as (or in) product
Ending inventory
Details on data collection can be found in Appendix H of Tracking
Toxic Chemicals: The Value of Materials Accounting Data (Dorfman and
Wise, 1997), which gives New Jersey Department of Environmental Pro-
tection form DEQ-114. The figure given in Sidebar 2.1 above highlights
the difference between the Toxics Release Inventory data and the New
lersey materials accounting data. Facilities covered under the Toxics
Release Inventory report data on chemicals (in pounds) only for on- and
off-site waste management (recycled, used for energy recovery, treated,
and discharged to publicly owned treatment works) and direct releases
to the environment (fugitive air emissions, point source air emissions,
surface water discharges, injections underground in deep wells, and dis-
charges to land). Toxics Release Inventory reporting does not give a com-
prehensive picture of toxic substances coming into a plant, being used or
consumed at the plant, being stored at the plant, or leaving the plant as
(or in) a product.
SUMMARY
Each of the accounting systems described in this section has a specific
scope and related limitations. Economic input-output tables focus on the
workings of the economy and track flows that represent only a subset of
the total flows of concern from a sustainability perspective. Physical in-
put-output tables go beyond the purely economic to capture the full range
of flows within a system of interest, but are contained within that system.
Material flows accounts operate at a different level of aggregation and
offer the opportunity to reach beyond a system of interest, whether from
the region to the nation or from nations to a global framework. They pro-
vide the basis for linking and integrating the full range of natural and
social sciences research and data, and for describing and better under-
standing the intricately interconnected network of the global economy
and environment as well as their impacts on people. Ultimately the key to
forming and using material flows accounts successfully is to collect de-
tailed data according to a defined structure on the quantities of targeted
materials, their composition, their origin and destination, and other asso-
ciated, salient characteristics such as toxicity. The next chapter examines
the broader context for material and energy flows information.
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32
MATERIALS COUNT
The input-output tables would in reality be made up of many
matrices, with rows and columns capturing the flows within and across
sectors. For example, one subtable of a full physical input-output table
could show the flows of individual nonferrous metals to various sectors
and to branches within a sector; the flows of products containing the
metals between sectors and as final products for consumption; ant! the
flows of residuals to air, lanci, and water. Other subtables would cover
flows of biomass, construction materials, fossil fuels, ant! ferrous metals.
short, physical input-output tables could show either the relationships
across sectors and/or branches of the economy or among material
groupings (i.e., materials used to produce other materials).
Like a material flows account, a physical input-output table covers
hidden or indirect flows as well as flows that have monetary value. In
contrast, an economic input-output table covers only those flows that
reflect measurable economic transfers and would therefore correspond or
map to only the portion of the physical input-output table that represents
economic flows (Figure 2.3~. Other parts of the physical input-output
table represent the hidden flows anal the outputs of residuals anal
pollutants from the economy to the environment. In aciclition, a physical
in~?ut-output table can capture flows of natural materials through natural
processes, inclucling the "grand cycles" of water, nitrogen, phosphorus,
and other materials through the natural earth system.
The linkages between the economic and physical input-output tables
represent both an important way of describing the implications of
material flows for economic systems and an important research agencia.
The research agenda is especially critical because conventional economic
measurement and tracking account for a relatively small proportion of
total flows, whereas it is the total flows that go to the heart of economic,
environmental, and social sustainability. Research issues are presented
comprehensively in Chapter 7.
DETAILS OF ACCOUNTING SYSTEM STRUCTURE
Beginning with Austria, the structure of economy-wide material flows
accounts has been explored in Europe since the early 1990s (Steurer,
1992~. A parallel effort was pursued in Japan during the same period
(Japanese Environmental Agency, ~ 992~. In ensuing years, similar
developments occurred! in seven other European Union counties, and the
efforts have culminated in the drafting of a European Union
PRE-PUBLICATION VERSION, SUBJECT TO EDITORIAL CHANGES
Representative terms from entire chapter:
flows accounts
