Energy and Material Flow Accounting

Physics provides the theory for physical accounting. Thermodynamic laws, applied not only to energy but also to matter, combine with economic bookkeeping to create the framework for energy and material flow accounts, and physical input-output tables. Explaining life on earth as a matter of energy supply suggests using energy values and accounts for assessing the state of the environment and the sustainability of human activity.

The relative ease of compiling material flows and interpreting them as pressures on natural systems makes material flow accounts (MFA) the favourite of both ecological economics and official statistics. The purpose of the MFA is to assess the possible de- or rematerialization of the economy, catering implicitly to ecological sustainability. In practice, physical flows alert to actual and potential environmental pressures. They fail in measuring the environmental and economic significance of different materials and substances. Part III will explore monetary valuation and accounting to this end.