Exergoeconomics and Extended Exergy Accounting

To overcome the limitations caused by the incompleteness of Ex as an EI, all 'production factors' must be included in the picture. But, in a 'production' process, be it natural or anthropogenic, how can we convert monetary expenses into exergy fluxes? An answer was first provided by the 'emergy analysis' method briefly described in the section titled 'Scope and function of an ecological indicator', which maintains that the 'monetary capital' that circulates in a society (a town, a county, a nation) is entirely supported by, and therefore equivalent to, the amount of solar energy that maintains life in the environmental niche in which that society thrives. This idea is in line with Herman Daly's critical assessment of the economic theories of growth: an economist by trade, Daly (echoing and developing concepts formulated by others, like Nicholas Georgescu-Roegen and Robert Costanza) distinguishes between natural ('NC') and monetary capital ('MC') and demonstrates that the two are not completely substitutable for each other, but rather complementary. The conclusion is that it is the amount of resources we avail ourselves of, and not our capital intensity, that is the key to our survival as an industrial society on Earth. From a completely different point of view, Jan Szargut had reached similar conclusions: he devised a procedure to 'track' all amounts of exergy used in the production of a commodity from the mining of the raw materials to the final distribution and disposal, and proposed to associate a 'cumulative exergy content' ('CEC') to each good or service, to express its 'value' in purely exer-getic terms. Extending and formalizing Szargut's approach, Valero developed his 'symbolic thermoeconomics' in which the 'cost' of a commodity is calculated not per unit (E/piece) but per exergy content (E/kJex): in this way, irreversibilities can be priced, and capital expenses compared with avoided thermodynamic losses, so that a monetary- and resource-based process optimization can be attained. Still, neither one of the above authors addressed the problem of how to convert nonenergetic expenditures into resource consumption indices. EEA is the first theory to provide a unified treatment of these issues, along the guidelines discussed here below.

First of all, let us define the 'specific extended exergy', ee, as the sum of the physical exergy defined by eqn [2] and of the equivalent exergy of capital (eeK), labor (eeL), and environmental remediation (eeO) activities. These equivalent exergies are expressed in kJ (their fluxes in kW), and represent the amount of primary resources required to generate one monetary unit (eeK), one work-hour (eeL), and to annihilate a certain pollution (eeO):

The fundamental premise of EEA is that 'economic systems are ecosystems that function only because of the energy and material fluxes that sustain human activities'. All agricultural, industrial, and economic activities can only exist as long as they exploit ('use') biophysical resources taken from a reservoir of noninfinite mass capacity but of practically infinite exergy capacity: from this point of view, it appears clearly that exergetic content, and neither capital nor labor is the correct measure for the value of a commodity or a service. To support the cancellation of monetary prices would be though both unrealistic and destabilizing: 'what EEA advocates is that the 'price tag' of a commodity be calculated on the basis of its extended exergetic content EE'.

EEA adopts the standard exergy accounting method of Szargut to embody into a product all of the exergetic expenditures incurred in during its production. Extraction, refining, transportation, preprocessing, final processing, distribution, and disposal activities are computed in terms of exergy 'consumption' (recall that exergy, unlike energy, is not conserved, and in each step of the extended production line a portion of it is irrevocably destroyed by irreversible entropy generation) (Figure 8). Thus, the 'exergetic' production factors can be accounted for in full, with the method outlined in section titled 'Structural representation of energy conversion systems' above. The following sections describe how to compute the equivalent exergy fluxes for the three

Figure 8 Exergy destruction in a productive chain.

'nonenergetic' externalities (labor, capital, and environmental remediation costs).

Labor, L, and Capital, K

The numerical correlation between the equivalent extended exergy of the unit of labor and of capital can be established by the following reasoning; the total net exergy primary influx Ein (J yr~ ) that flows from the environment into a society S in the form of energy and material fluxes can be regarded as the 'thermodynamic fuel' of the very large number of very complex processes that result in the operation of the society. The 'products' of S are all produced, used and disposed off internally, and its only 'outputs' are the waste materials and the waste energy that S discharges into the environment (Figure 9). The four classical 'production factors' within S are energy (exergy), materials, labor, and capital; the first two are already contained in Ein, while the last two are generated within S. We can therefore assume that both L and K are 'equivalent' to a certain portion of the incoming exergy flux, and write

where M2 is a proper measure of the 'monetary flux': its choice is of course somewhat arbitrary, and EEA adopts the global net monetary circulation (M2 is in € yr~ ), which for each country is computed and published by the Central Bank.

For labor, the very same reasoning leads to assign labor, and in general human services, an equivalent exergetic value equal to 'a portion of the total (yearly averaged) primary exergetic resource input Ein divided by the number of working hours in S':

^workhours , S

In [13] and [14], a is a country-specific constant that represents the 'capital intensity' of that country, and as such is space and time dependent.

For the EEA method to be optimally applicable, it is necessary that the economic and the exergetic value

Exoutput - 0

Figure 9 Global exergy fluxes in and from a society.

Exoutput - 0

Figure 9 Global exergy fluxes in and from a society.

become locally consistent in the long run, allowing the two value scales to reach a sort of local fixed parity. Notice that the very same definition of the exergy-equivalent implies that different countries may have different eeK, due to their different productive and economic structures and lifestyles, and that for a country both eeK and eeL may vary over time, due to an evolving social structure.

The capability of attaching to the labor input (taken here to include all service-related, blue- and white-collar human activities) a properly computed exergetic value is perhaps the most relevant novelty of EEA. Currently, in all practical applications of 'engineering cost accounting', including thermoeconomics, labor is either completely neglected or it is accounted for on a purely monetary basis; this is unsatisfactory though, because it assigns a higher weight to market conditions and financial considerations than to social, technical, and environmental issues that if properly valued may so distort the objective function that new solutions emerge.

Environmental Impact, O

All current methods for assigning a monetary cost to environmental damage in essence suggest that once a substance is acknowledged to be (in some sense) harmful, it becomes 'regulated', that is, legal upper limits are set to its free release into the environment. This is equivalent to setting, for a given technology, an 'upper limit to the acceptable clean-up costs for that particular effluent'. For many pollutants, though, the environmental situation has deteriorated to a point where the overall balance of the biosphere has already been affected, and even a small amount of each one of these pollutants is, strictly speaking, intolerable. Therefore, to make a nonzero limit 'acceptable', the risks to humans are assessed in terms of monetary health and life expectancy parameters, and an upper bound is set a priori to the expenditures in such a way to remain below a certain statistical probability of incurring that risk. jt is easy to see that this method actually promotes an 'unfair transfer not only of the pollution, but also of the health risks from a region to another'. A solution to this situation has recently been sought, by linking the monetary structure of the environmental levies to energetic considerations: this is the rationale behind the 'pollution commodity trading' and the 'exergy tax'. These are remedial measures though, aimed at a fairer redistribution of the 'environmental pressure' on a global scale, and do not address the issue of how high the actual environmental 'cost' is (all current methods take the currently regulated values as a basis for their calculations).

The EEA approach is substantially different: consider a process P (Figure 10a), and assume that its only effluent is a stream which contains hot chemicals,



(To ,

ß 1o )


(To ,

ß 2o )


(To ,

ß 3o )

Figure 10 Environmental cost assessment in EEA. (a) The effluent O2 is not at reference conditions. (b) Treatment of the effluent O2. Each final effluent is at its reference conditions. (c) Only a portion of the clean-up is performed by man-made treatment processes; the remaining takes place spontaneously by biodegradation in the immediate surroundings.

some of which are not at their standard environmental concentration. To achieve a 'zero' environmental impact, these chemicals would have to be brought to both thermal and chemical equilibrium with the environment O: thus, the real exergetic cost of the zero-impact is not proportional to the physical exergy of the effluent, but is rather equal to the extended exergy (sum of the net physical exergy spent in the clean-up process, plus the invested exergy, labor and capital, required by the installation and operation of the effluent clean-up devices) ideally required to cool the effluent to TO and break it up into its constituents such that each one of them is in equilibrium conditions with the surroundings. A representation of such an effluent treating process is shown in Figure 10b: the additional process Pt may generate some exergetic output, requires an energetic input, some auxiliary materials, labor and invested exergy, but its output will have a zero physical exergy. 'These additional exergetic expenditures required by Pt must be charged to the effluent O2, whose extended exergy (i.e., its 'cost' in terms of primary equivalent resources) will now be higher than its physical one. Therefore, the overall conversion efficiency of the joint process (P + Pt) is decreased. There may be effluents for which some of the chemical decomposition reactions take place 'spontaneously', in a short time and in the immediate surroundings of the emitting source: in such cases (Figure 10c) the reactions must draw on some exergy source within the environment (a certain particular chemical catalyst, oxygen, water, solar radiation, or even a biological system), and this exergy flow must be accounted for as well.

EEA thus allows for a consistent incorporation of the effects of effluent treatment in the extended exergetic balance of a process, and provides an 'absolute' order-of-magnitude estimate of the minimum exergy consumption necessary to achieve zero impact. Notice that, if an acceptable level of pollutant is specified, then the minimum exergetic expenditure will be proportional to the difference between the values of the physical exergies of the effluent stream between the point of its release and the 'regulated' state point. Here, we recover one of the desirable features of present environmental cost estimates and at the same time avoid the considerable effort required to determine what the 'tolerable environmental impact limit' for a certain pollutant would be.

Once the fluxes M, E, L, K, O (our individual 'production factors') have been computed in terms of exergy equivalents, EEA makes use of the structured representation described in the section titled 'Exergy of living forms' to compute the costs of the final products and to study their dependence on a variation ofprocess parameters. All terms being now expressed in terms of a uniform quantifier, the procedure is somewhat simpler and, more important, absolutely independent of external factors as market fluctuations or time-varying currency exchange levels.

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