Green Economics

Timothy Considine
May 01, 2002

In 1963, the Danish town of Kalundborg was chiefly known for its 12th-century cathedral, designed as both a stronghold and a place of worship. Today Kalundborg is a showcase for what economist Timothy Considine calls "industrial symbiosis, where waste from one industrial plant is used as inputs for another."

back right headlight of a blue car
James Collins

The steel industry is a classic example of an evolving industrial ecosystem. Whether or not recycling minimizes the environmental cost of steel production may depend on the source of electricity used.

At the center of the Kalundborg industrial park is a large, coal-fired electrical power-generating station. Waste steam from the power plant runs a pharmaceutical plant and an oil refinery. Waste heat is piped to houses in the nearby town, replacing 3,500 household oil heaters. Waste water from the oil refinery goes back to the power plant, in place of fresh water that had previously been pumped from nearby Lake Tisso. Waste gas from the refinery runs a factory making gypsum wallboard, which also uses gypsum extracted from the power plant's wastes. Sulfur, a byproduct of the oil refinery, becomes sulfuric acid at yet another plant. Fly ash, left over from the power plant, is made into cement. The sludge from the pharmaceutical plant's yeast-based processes fertilizes farmers' fields. Like symbiosis between plants or animals, what one partner excretes the other needs. One industry's trash is another's treasure.

Kalundborg is a case study in industrial ecology, said Considine, a professor of mineral economics and director of the Center for Economic and Environmental Risk Assessment at Penn State. Inspired by the environmental movement, industrial ecologists think of pollution in a holistic sense, as part of a closed loop of inputs and outputs that must be kept in balance. Rather than continuing the "cowboy economy," where industries metaphorically leave their campfire ashes behind and move on to a new frontier, industrial ecologists are working toward a "spaceman economy," where everything is recycled and carried along on the spaceship.

"We no longer live on an extensive margin that allows us to dispose of our waste without thinking of the consequences," said Considine, who has studied the American steel industry as an example of an evolving industrial ecosystem. "Industrial ecology is a way of viewing environmental problems differently."

Ecologists track the biogeochemical cycles of Earth: how elements like carbon, iron, phosphate, and sulfur travel between earth, air, water, and living things. The system is a closed loop: no sulfur, for instance, leaves or enters the planet, it just changes form, sometimes being sequestered in rocks, sometimes polluting the air as sulfur dioxide.

Likewise, industrial ecologists track industrial materials as they cycle through four stages: the natural environment, raw materials or commodities, productive capital, and final products.

Both forms of ecology are based on the mass balance concept, Considine explained, where both inputs and outputs are calculated. "For example, we're now controlling sulfur dioxide pollution from coal-fired power plants. But if the sulfur is not going up the stacks and into the air, it's going somewhere else. Where? Into the solid waste from the scrubbers. We still need to deal with it. If we look ahead, as more and more coal scrubbers are installed we'll develop more solid waste, more spent scrubber sludge. What are we going to do with it? One idea is to incorporate it into concrete products." But industrial ecology doesn't stop there. "It involves looking upstream at the inputs—not just the emissions—then identifying opportunities for closing waste streams."

Central to this approach to pollution, as its name implies, is industry. "What I find refreshing and unique about industrial ecology," said Considine, "is it gets away from the adversarial conflict between the environment and business."

Industrial ecologists look for strategies for waste reduction, reuse, and recycling. They draw on science, engineering, economics, and business to identify what Considine calls "loop-closing opportunities"—ways to make a profit by closing a loop between outputs of one process and inputs of another, as was done in Kalundborg, Denmark.

"The example of Kalundborg has captured the interest of business strategists," said Considine. "It's the idea of being 'green' and competitive—economist Michael Porter's hypothesis. The idea that it can be profitable to reduce your ecological footprint."

Such "green economics" takes a different frame of mind, a different way of viewing pollution. "Pollution is often looked at as a side effect. If you produce electricity, you produce a side effect—smoke. There's no market signal that you're causing harm, that the price of your product should be higher to compensate for that harm," Considine notes. "But if you look at an industry as a box, in mass balance terms, you can view pollution in terms of an inefficiency. It's a measure of the inefficiency in the production process. It reveals flaws in production design." Redesigning in order to reduce pollution—to increase efficiency—can result in materials savings, increases in yields, lower energy costs, and other obvious benefits to an industry. "If you do this analysis of your process, you'll identify where the losses are occurring. By reducing process losses, you will improve the quality of your product."

Although there are doubtless other Kalundborgs, integrating industries to that extent is not easy. Significantly, noted Considine, it can't be legislated into place. Economists John Ehrenfeld of Yale University and Nicholas Gertler of Harvard, who traced out Kalundborg's complicated system of symbiosis, discovered that it was not the result of any central plan, not the vision of any far-seeing government official or CEO. "It just evolved," Considine said. "Each of those waste loop closings was a delicate, technical, business relationship. Each was a normal two-party negotiation." Ideas sometimes took years to be worked out.

For instance, although the power plant was built in 1959 and the wallboard factory opened in 1972, for its first 20 years, the wallboard factory imported gypsum mined in Spain rather than using the waste gypsum from the power plant right next door. "The reason the gypsum didn't make it to the wallboard company earlier was that the factory needed delivery on a regular schedule that the power plant couldn't guarantee." Cooperation entails a certain level of risk: the factory receiving the waste is, in a way, held hostage by its source of raw materials.

Other barriers to loop closing, besides that loss of independence, include technical incompatibility: "The waste has to compete with the virgin material in terms of purity," Considine said.

"Then there are regulations that impose costs for licensing and transport that can make recycling economically unviable. The best example is the regulations on toxic materials. If your waste is labelled toxic, it's a death knell on recycling it because it's so expensive and complicated.

"Finally, people don't realize that certain waste streams are out there, available for the taking."

In some ways, then, government—or at least culture—does affect the level to which industries will act in symbiosis. "One of the unique aspects of culture in Denmark is that all the engineers in Kalundborg hung out together. They knew each other. There was a level of exchange of technical information between engineers in different plants that does not occur in the United States. We have walls of litigation and proprietary information that keep us from working together. Scandinavian economies have a somewhat different ethos in terms of their interface with the environment. It could be geography, it could be climate, it could be history, but for some reason they have more of a team attitude when it comes to dealing with environmental problems."

To make more Kalundborgs in America, Considine said, we need to encourage more of that kind of communication, that "team attitude," both within firms and outside. It will take leadership "at the highest levels," inspired by market incentives and government regulations that focus on outcomes (a lessening of sulfur dioxide in the atmosphere) not ones that dictate solutions (scrubbers). "Industry tends to operate better when the goals are very clear," Considine said. "Keep it simple and clear and strict. That forces firms to really rethink their production processes. What are we going to do with all that scrubber sludge? We need to look at all the ramifications. We've compartmentalized our environmental regulations." Yet we only have one spaceship Earth. "We need to learn to deal with waste as an opportunity, not a cost."

Timothy J. Considine, Ph.D., is professor of mineral economics and director of the Center for Economic and Environmental Risk Assessment. His work on the industrial ecology of steel was funded by the National Science Foundation and the Department of Energy. He has served as an adviser to the Office of Technology Assessment, the National Governors Association, the California Energy Commission, the Energy Information Administration, the Department of Energy, and the Institute for Defense Analysis; abroad he has been adviser to the World Bank and the Australian Mining Council.

Last Updated May 01, 2002