New Bottom Line Volume 6.19 – Regional Metabolism Analysis: A Tool for "Reality-based" Economic Development

September 1, 1997

These columns have often looked at “industrial metabolism” at the enterprise level, examining the energy and resource flows through industrial systems–akin to the living metabolism on living organisms–to understand their dynamics, efficiencies, and opportunities. But the metaphor can be extended to consider the resource flows of any system, large or small, to the scale of a region or even a country.

“Any progress towards sustainable development,” according to Germany’s Wuppertal Institute, “strongly depends on the availability of methods to describe and analyze the ‘metabolism’ of the economy. Priorities for substitution and dematerialization measures can only be set efficiently, if the status quo and the current trend of material flows are known.”

In fact an international Material Flow Accounting (MFA) conference is underway at Wuppertal as I write <>;, under the auspices of the Environment and Climate Programme of the Commission of the European Union, to forward a common framework for MFA activities. MFA refers to “accounts in physical units (usually in terms of tonnes) comprising the extraction of, production, transformation, consumption, recycling and disposal of materials (e.g. substances, raw materials, base materials, products, manufactures, wastes, emissions to air, water or soil).”

This spring, GFA conducted a pilot “regional metabolism assessment” for a regional economic development agency in rural Virginia. “Virginia’s River Country,” as it calls itself, is a ten county region a few hours southeast of Washington DC; the region hosts substantial fishery, forestry and agricultural sectors, an increasingly diverse manufacturing sector, and growing tourism and retirement home sectors. Especially because of this last element, the agency is particularly concerned about “compatible economic development”–economic development that doesn’t erode the quality of life that brings people to the region in the first place.

Compatible economic development also makes good economic sense, we found, since “environmental quality can actually be a limiting factor on economic growth; e.g., ground water or surface water contamination may reduce a region’s ability to attract new manufacturing concerns that require water clean enough to meet industrial process standards. Conversely, environmentally sensitive business strategies create new economic opportunities; e.g., promoting regional water efficiency may, in effect, provide an economically advantageous “new” water source when new sources of supply are expensive or inconvenient.”

The agency charged us to: identify potential business opportunities, replace resources that are being imported from outside the region with local resources, add value to products produced in the region prior to departure from the region, and utilize existing waste material in a productive manner. To do this, we modeled energy, materials, and water flows–the region’s “metabolism”–by county and economic sector, and compared economic resource flows with the energy, materials, and water flows of the natural landscape–the fundamental resources that sustain economic life. We then created a simple visual atlas to identify economic sectors which are currently underexploited, those which need to be developed with particular environmental sensitivity, and those which may face resource challenges in order to not overwhelm existing natural flows.

Understanding the underlying metabolism–think of it as a reality check on economic abstraction–makes it possible for new and existing businesses to harvest new revenue streams by turning wastes into resources, improving resource efficiency, using local resources in place of imported ones, and adding value locally. And in fact many intriguing insights emerged, in two key dimensions:

Throughput efficiency

In traditional economic measures, the pulp and paper industry provides about half the region’s manufacturing value added, and about one-third of manufacturing jobs. But looked at in relation to throughput efficiency–value added per kilowatt hour of energy, gallon of water, pound of emissions–pulp and paper was the least efficient sector. Moreover, the study found that timber harvest rates exceeded timber growth rates in at least three of the ten counties, and was more than 150% of growth rates in at least two counties–hardly a recipe for a sustainable economy, environmental impact aside. This suggests that future economic growth should emphasize other industries–and target efficiency improvements for pulp and paper.

Resource clusters

One key industrial ecology strategy is turning wastes into resources. By examining resource inputs and “non-product” outputs in each manufacturing sector we were able to identify a number of opportunities, including two possible “ecological industrial clusters” with rich resource flow interconnections–one based on agriculture/forestry/industrial and the other on food/textiles–that offer great potential for waste matching, import substitution, and local value-added production. These clusters, or ones like them, can provide a focal point for economic development efforts that improve environmental quality while creating jobs from optimal use of resources. Economic development staff can now focus on businesses which complement the clusters, and support enterprises which help make the clusters more effective. Though regional metabolism analysis is still limited by data availability, this study yielded several key strategies to guide future economic development in the region:

  • Eco-Efficiency–maximize the economic productivity of resource use, and leverage existing infrastructure to meet economic development needs (a significant economic opportunity, since the region’s energy bill exceeds its manufacturing value added);
  • Wastes into Resources–develop materials exchange networks and clusters for local industry and natural resources sectors that can provide economic development leverage;
  • Agricultural and Forestry Diversification–target the growing markets for agricultural and forestry products as industrial feedstocks and pursue specialty product niche markets;
  • Compatible Development and Recruitment–target companies and sectors based on their fit with existing businesses and environmental compatibility, in addition to traditional revenue, employment, and taxation considerations;
  • Import Substitution and Value-Added Production–diversify the local economy and encourage additional value-added production steps.

The Virginia report (written by Gil Friend and GFA Associate Stuart Cowan, with the assistance of intern Lloyd Connelley) is now being edited for general distribution, and the methodology is being offered to other jurisdictions; a summary, and ordering information, will be posted soon on our Web site.

(c) 1997 Gil Friend. All rights reserved.

New Bottom Line is published periodically by Natural Logic, offering decision support software and strategic consulting that help companies and communities prosper by embedding the laws of nature at the heart of enterprise.

Gil Friend, systems ecologist and business strategist, is President and CEO of Natural Logic, Inc.

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