From Engineering Economics to Extended Exergy Accounting: A Possible Path from Monetary to Resource‐Based Costing

Enrico Sciubba

Journal of Industrial Ecology, 2004, vol. 8, issue 4, 19-40

Abstract: The article describes the extended exergy accounting technique (EEA), a novel method for computing the cost of a commodity based on its resource‐base equivalent value (as opposed to its monetary cost) that enables the analyst to perform more complete and meaningful assessments of a complex system. The claim made here is that the novelty, as well as the decisive advantage, of EEA consists in its being entirely and uniformly resource based, thanks to the inclusion in the system balance of exergetic fluxes equivalent to labor, capital, and environmental remediation costs. In this respect, EEA owes some of its structural formalism to Sraffa's network representation of the economic production of commodities by means of other commodities, which it extends by accounting for the unavoidable energy dissipation in the productive chain (whose economic implications were first discussed by Georgescu‐Roegen), to Daly's pioneering work in resource‐oriented economics, and to Szargut's cumulative exergy consumption method. The representation of a process by means of its extended exergy flow diagram is discussed in this article, and it is argued that some of the issues that are difficult to address with a purely monetary approach can be properly resolved by EEA. The main shortcomings of EEA are its intrinsic locality in time and space: They are demonstrated to be necessary and not casual consequences of its very definition and of the nonuniformity of societal conditions. In the conclusions, some indications are given as to the possibility of using this new technique to complement (and extend) other current tools, such as life‐cycle assessment or environmental footprint analysis.

Date: 2004
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