Copernicus Instituut voor Duurzame Ontwikkeling en Innovatie

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EPIST - Workshop
The EPIST Project Assessing the Interactions
between Physical and Monetary Growth in the
Industry
Utrecht, 19 April 2006
Martin Weiss Martin Patel Utrecht
UniversityDepartment of Science, Technology and
Society (STS) Copernicus Institute for
Sustainable Development
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Content

• Introduction
• Background Information
• Empirical Results
• Discussion

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Introduction

• Economic growth projections for scenarios on
  energy demand and greenhouse gas emissions
• Moderate growth rates lead to very high GDP
  values over long time periods

Gross World Product (Index, 1990 1)
2100
2050
2000
1950
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Introduction

• Economic growth projections for scenarios on
  energy demand and greenhouse gas emissions
• Moderate growth rates lead to very high GDP
  values over long time periods

• Key question How do projections of
  economic growth translate into increased
  physical activities?

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Background
(Vehmas et al. 2003)
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Background
Physical flows based on Adriaanse et al. (1997),
Value added from Groningen Economic Database
(2005)
Physical Flows Only Final Products
Physical Flows Only Semifinished Products
Physical Flows Without Chemical Feedstock
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Background
Share of Manufacturing Sectors on the total GDP
Analysis for 19 industrialized countries
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Background
Source L\Projects\EME\EPIST\DataFile Steel_calc
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Background
Source L\Projects\EME\EPIST\DataFile
IU_VLEEM_MATERIALS
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Background
Source L\Projects\EME\EPIST\DataFile Steel_calc
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Background
Source L\Projects\EME\EPIST\DataFile
IU_VLEEM_MATERIALS
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Background
Demand for new, innovative products
Market competition
Lower unit price
Declining unit costs due to scale economies and
learning by doing
Increased consumer demand for products (due to
price elasticity)
Investment to increase physical capacity and
scale of production, substitution of capital and
natural resources for labor
Availability of physical resources and energy
Technological innovation
Changing labor costs
(adapted from Ayres et al. 2003)
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Background

• Research Hypotheses 
• Value added per unit of physical output is
  declining
• Increasing absolute value added has to be either
  realized by increased physical production or by
  specialization in high value niche products
• Re-coupling occurs between physical production
  of bulk products and the value added of the
  industrial sector
• Bulk industrial products are increasingly
  produced by low-income countries

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Empirical Results
Source L\Projects\EME\EPIST\DataFileValue_added
_deflators_and OECD
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Empirical Results
Source L\Projects\EME\EPIST\DataFileValue_added
_deflators_and OECD
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Empirical Results
Source L\Projects\EME\EPIST\DataFileValue_added
_deflators_and OECD
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Empirical Results
40 vs. 59
408 vs. 118
239 vs. 118
13 vs. 6
strong decoupling weak decoupling recessive
decoupling
strong re-coupling expansive re-coupling weak
re-coupling
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Empirical Results
Source L\Projects\EME\EPIST\DataFileValue_added
_deflators_and OECD
19
Empirical Results
Source L\Projects\EME\EPIST\DataFileValue_added
_deflators_and OECD
20
Empirical Results
Source L\Projects\EME\EPIST\DataFileValue_added
_deflators_and OECD
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Empirical Results
Agriculture and food processing sector in the
EU-13
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Empirical Results
Value Added and Physical Production in the
Netherlands
(Hoekstra and van den Bergh 2003)
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Empirical Results
Passenger Car Manufacturing in Germany
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Discussion

• Quality of value added data questionable (South
  Asia, China)

• Deflation and conversion methodology applied is
  problematic
• Comparing value added data for EU-15 with
  physical production data for EU-33

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Conclusions

• Data show a general trend towards declining
  value added per unit of physical output in the
  analyzed industries
• Indications for a general trend towards
  re-coupling between physical and monetary growth
  of the bulk industry
• findings are supported by other studies
• Indication that product specialization (e.g.
  producing pharmaceuticals) can moderate value
  added decline of bulk products
• Value added per physical output is much smaller
  in South Asia and China than in Europe or North
  America

• Scenario Projections Economic growth of the
  industry might lead at least to a comparable
  growth of physical output

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Thank you!
Comments Questions?
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Additions
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Additions
Source L\Projects\EME\EPIST\DataFileVolumen_Wer
t_Stahl_Deutschland