Benchmarking for sustainable and economically viable technology … ECON... · 2013. 11. 7. · Clinker is an intermediate product in the production of cement and is made of limestone

Benchmarking for sustainable

and economically viable

technology options

Selected industries in Ukraine

Low Carbon Ukraine - Technical Paper No. 2 (August 2013)

Project

“Capacity Building for Low Carbon Growth in Ukraine”

Benchmarking for sustainable and economically viable technology options


Green Growth Technical Paper No. 2

ii

Contact:

DIW econ GmbH

Dr. Lars Handrich

Mohrenstraße 58

10117 Berlin

Germany

Phone +49.30.20 60 972 - 0

Fax +49.30.20 60 972 - 99

[email protected]

www.diw-econ.de

http://www.diw-econ.de/




iii

Table of contents

1. Introduction ..................................................................................................................... 1

2. The benchmarking approach .......................................................................................... 1

3. Benchmarking the non-metallic mineral products industry in Ukraine ............................. 3

3.1 Database ................................................................................................................. 3

3.2 Benchmarking methodology .................................................................................... 4

3.3 Benchmarking results .............................................................................................. 7

3.4 Implications for the minerals industry of Ukraine ...................................................... 9

4. Benchmarking the chemicals and chemical products industry in Ukraine ......................14

4.1 Database ................................................................................................................14

4.2 Benchmarking results .............................................................................................15

4.3 Implications for the chemical industry of Ukraine ....................................................18

5. Conclusions and outlook ................................................................................................20

References ...........................................................................................................................21

Appendix ..............................................................................................................................22




iv

Executive Summary

To determine green growth potentials in Ukraine a detailed sectoral analysis is necessary.

This includes assessing the economic viability and the environmental sustainability of the

different sectors. The focus of this paper is on the chemicals and chemical products industry

as well as on the non-metallic mineral products industry in Ukraine.

The presented international benchmarking approach identifies the countries that have the

best combination of sustainability and economic viability. That will take into account

comparing the performance of:

High levels of desired outputs such as production volumes (in physical unites) or

revenues (values),

Low levels of undesired outputs like emissions or pollution, and

Low levels of factor inputs like labour or energy use as well as other arising

production costs.

Based on detailed analysis of the structural characteristics of the industries, feasible peer

countries for Ukraine are identified. As a result, a technological yardstick allowing to quantify

the potential for reducing greenhouse gas emissions is determined for each sector. For the

non-metallic mineral products industry a full realisation of this potential would result in

abating 8.2 Mt of CO2 equivalents per year. For the chemicals and chemical products

industry our analysis shows that there is an emission savings potential of at least 1.3 Mt of

CO2 equivalents per year through technical improvement. The analysis also shows an

additional emission savings potential through scale adjustments. However, to identify this

potential further research is needed.




1

1. Introduction

Developing a low-carbon growth strategy requires an understanding of the mitigation

potential in the most relevant sectors of the economy. Therefore, we apply a sector-specific

analysis of mitigation potentials that takes into account economic viability as well as

environmental sustainability. The methodology applied to the chemicals and chemical

products industry and the non-metallic mineral products industry is the same methodology

we applied to the metal industry in Ukraine in Policy Paper No. 11.

2. The benchmarking approach

The key objective of our benchmarking approach is to identify technology options for a given

industrial sector to best combine sustainability and economic viability. The yardstick for this

comparison is a balanced combination of:

High levels of desired outputs such as production volumes (in physical units) or

revenues (values),

Low levels of undesired outputs like emissions or pollution, and

Low levels of factor inputs like labour or energy use, or production costs.

The focus of the benchmarking approach is on technologies that are currently used in

practice, while theoretical solutions and technologies that are not yet implemented are not

considered. Thus, only technically as well as economically feasible and viable solutions are

considered as benchmarks.

In economic terms, the best combinations of desired outputs, undesired outputs and inputs

are considered to be efficient. Theoretically, efficiency levels of different technologies can be

measured as well as decomposed into different subcomponents related to technology, scale

and price levels (see Box 1). For practical applications, however, such a comparison is

strongly limited by the availability of data and relevant information. In particular, micro-level

benchmarking of different installations or companies is rather difficult and requires access to

private and often confidential information. Alternatively, one can benchmark the same

industry across different countries. That way, detailed company- or even installation-specific

1 DIW econ (2012): Benchmarking for sustainable and economically viable technology options, The

case of the metal industry in Ukraine; Low Carbon Ukraine - Policy Paper No. 1 (December 2012)




2

information is compensated by aggregate information from a range of countries, which is

more easily available. Such an international benchmark allows identifying the countries with

the most efficient technologies in use.

Box 1: The concept of economic efficiency

Efficiency is an economic concept which describes the optimal use of production factors in

production processes. In economic terms, efficiency is evaluated as the relationship

between the quantities of primary factor inputs such as labour, capital or energy (henceforth

inputs) and the specific goods such as steel, chemicals or food (henceforth outputs) which

are produced from these inputs. It is typically defined as either:

The lowest-possible amount of inputs for the production of a given set of outputs (input-

oriented efficiency); or

The highest-possible level of outputs that can be produced from a given set of inputs

(output-oriented efficiency).

Modern efficiency measurement starts by decomposing overall economic efficiency levels

into several subcomponents that can be measured separately:

Technical efficiency describes the ability of a firm to obtain optimal combinations of input

and output quantities;

Scale efficiency describes the ability of a firm to produce at optimal combinations of input

and output quantities while optimising all scale economies; and

Price efficiency is the most restrictive criterion which also reflects the ability of a firm to

combine inputs and outputs in optimal proportions, given their respective price levels.

In this analysis, efficiency will be measured in terms of technical efficiency and scale

efficiency.




3

3. Benchmarking the non-metallic mineral

products industry in Ukraine

This section provides the benchmarking approach for the non-metallic mineral industry in

Ukraine. The focus of interest is the relationship between the inputs used in the production

processes in different countries (i.e. labour, capital and energy) and the respective outputs in

terms of the gross output, greenhouse gas (GHG) emissions and non-metallic mineral

products. For ease of notation the non-metallic mineral products industry will be referred to

as minerals industry in the following.

3.1 Database

The two major sources providing data on the minerals industry in different countries are:

the World Input Output Database (WIOD) which has been compiled by a consortium

of scientific organizations with financial support of the European Union2, and

the National Inventory Submissions 2013, United Nations Framework Convention on

Climate Change (UNFCCC)3.

Additional data stems from

the Minerals Yearbook, United States Geological Survey (USGS) Mineral Resources

Program4, and

the SDBS Structural Business Statistics (ISIC Rev 3), Organisation for Economic

Co-operation and Development (OECD) 5

The databases of WIOD and OECD are broken down by various industries that are based on

the ISIC standard of the United Nations Statistics Division. The UNFCCC data base

additionally contains detailed information about industrial products. The data of the USGS

Minerals Yearbook solely refers to mineral and mineral products.

2 http://www.wiod.org/

3http://unfccc.int/national_reports/annex_i_ghg_inventories/national_inventories_submissions/items/7383.php

4 http://minerals.usgs.gov/

5 http://stats.oecd.org/Index.aspx?DataSetCode=SSIS_BSC

http://www.wiod.org/

http://minerals.usgs.gov/




4

With respect to the countries that are included in the international benchmarking approach,

our intention was to primarily cover technological leaders in the relevant sector. For the

present analysis 18 EU countries and 10 non EU countries are included in the data base (as

listed in Table 1 below) for which the following information is available:

GHG emissions (in thousand tonnes of CO2 equivalent, source: wiod.org),

Energy Use, Emission Relevant (in TJ, source: wiod.org),

Gross Output (in millions of US dollars, source: wiod.org),

Number of persons employed (in thousand persons, source: wiod.org),

Real fixed capital stock (in millions of US dollars, source: wiod.org),

Total production of clinker (in kilo tonnes, source: UNFCCC, USGS),

Total production of glass (in kilo tonnes, source: UNFCCC, OECD),

Production of lime (in kilo tonnes, source: UNFCCC, USGS),

Production of soda ash (aluminium kilo tonnes, source: UNFCCC, USGS)

Ukraine is not included in the WIOD dataset therefore the data (gross output, energy use,

capital stock and persons employed) was gained from national sources.

Note that production data is not completely available for all countries. Nevertheless we can

use this sample of countries for a first assessment of the benchmark analysis. Since the

most recent information for all countries is available for 2007, this year is chosen as base

year for the benchmarking analysis.6

3.2 Benchmarking methodology

Under ISIC the minerals industry is described as “Manufacturing of other non-metallic

mineral products”.7 This includes among others the production of cement, glass and glass

products, ceramic products, lime, plaster as well as articles of concrete, plaster and cement.

For the structural analysis of the minerals industry we will focus on the production of clinker,

lime, glass and soda ash which henceforth is referred to as production:

6 In fact, 2007 is a good choice for a base year since it is the last year before the start of the global economic crises.

7 ISIC Rev 3.1 division 26.




5

Clinker is an intermediate product in the production of cement and is made of limestone

and clay or shale. When these raw materials are heated in the cement kilns, they are

formed into lumps or nodules which are called clinker. To produce cement, the clinker -

sometimes together with a small portion of calcium sulphate - is pulverized into fine

powder. This procedure is used to produce Portland and other types of hydraulic

cements.

Lime is calcium oxide or calcium hydroxide and is made out of limestone. The limestone

is heated in different types of lime kilns to decompose the carbonates. Inter alia it is used

as building and engineering material and as chemical feedstock.

Glass production can be divided into four major manufactured products: containers, flat

(window) glass, fibre glass, and specialty glass. The first two types are the most common

ones and are almost completely soda-lime glass. This glass is produced by melting

silicon dioxide, sodium carbonate, and lime with a small amount of aluminium oxide and

other alkalis and alkaline earth.

Soda ash production can be divided into the production of natural and synthetic soda

ash. The natural soda ash is produced from trona or sodium-carbonate-bearing brines

whereas the synthetic soda ash is produced by one of several chemical processes that

use limestone, salt and coal as feedstock. It is commonly used as raw material in glass,

chemicals, detergents, and other important industrial products.

Table 1 gives a first impression of the performance of different countries in the minerals

industry. The first two columns refer to the sustainability (emissions per output) and the third

and fourth column to economic viability (output per capital input) of the production processes

in the different countries.8 For ease of comparison the three top performers in each column

are shaded in grey. With respect to the sustainability (columns i and/or ii) Czech Republic,

Finland, Ireland, the Netherlands and Romania show top performance while Canada,

Romania, Russia, Ukraine and the United Kingdom are the top countries with respect to

economic viability (columns iii and/or iv) . As can be seen in Table 1 the gap between

Ukraine and the leading countries is significantly higher with respect to sustainability as

compared to economic viability.

8 For countries where data on production is not completely available, values for columns ii and iv could not be provided.




6

Table 1: Comparison of capital and emissions intensities across countries, year 2007

2007 Emissions per

revenue

Emissions per volume of production

Revenue per capital stock

Volume of production per capital

stock

(tons of CO2-e per thousand

US-$)

(tons of CO2-e per ton of mineral product)

(US-$ per US-$)

(tons of mineral product per

thousand US $)

(i) (ii) (iii) (iv)

AUSTRALIA 1.08 0.83

AUSTRIA 0.85 1.15 1.42 1.05

BELGIUM 1.43 1.04 1.05 1.44

BRAZIL 1.56 0.94

CANADA 1.09 2.05

CZECH REPUBLIC 0.85 0.60 1.05 1.48

DENMARK 1.17 1.25 1.26 1.18

FINLAND 0.61 0.82 1.77 1.32

FRANCE 0.77 0.98 1.68 1.32

GERMANY 0.78 0.92 1.46 1.22

HUNGARY 1.48 0.97 1.03 1.56

INDIA 3.32 0.58

IRELAND 0.73 0.55 1.09 1.44

ITALY 1.07 1.13 1.00 0.95

JAPAN 0.81 0.85 0.69 0.66

SOUTH KOREA 1.30 1.33

NETHERLANDS 0.32 0.89 1.64 0.60

POLAND 1.41 0.97 1.52 2.21

PORTUGAL 1.34 0.88 1.13 1.73

ROMANIA 3.82 0.70 1.27 6.99

RUSSIAN FEDERATION 5.04 1.14 1.79 7.91

SLOVAKIA 1.33 0.88 1.72 2.58

SPAIN 1.35 1.29 1.23 1.28

SWEDEN 0.94 0.97 1.59 1.54

TURKEY 1.45 1.16

UKRAINE 4.41 1.26 1.09 3.80

UNITED KINGDOM 0.85 0.93 1.95 1.78

UNITED STATES OF AMERICA 1.65 1.57

Source: DIW econ based on wiod.org, UNFCCC, USGS,

OECD, State Statistics Service of Ukraine

However, the comparison of different indicators does not yet allow for deriving overall

conclusions. In fact, it must be emphasized that:




7

First, output can be measured as value or in physical quantities (i.e. in millions of Dollars

or in tons of output). However, minerals industries produce a range of different products

such as cement, lime and glass based on different production processes. Hence, a

feasible output measure must consider the relevant structural characteristics.

Second, the costs of production (inputs) do not only include capital but also other key

inputs such as labour and energy.

Third, the comparison of different indicators does allow the identification of the leaders in

each respective category, but not necessarily the identification of those countries that

perform relatively well in all categories. However, the objective of the benchmarking

analysis is to identify the best combinations of both, sustainability as well as economic

viability.

In order to determine the countries with the most-efficient combinations of inputs and outputs

(i.e. the most efficient technologies) we apply a specific empirical estimation technique, the

Data Envelopment Analysis (DEA). This is a well-established methodology for estimating

different efficiency measures (as described in Box 1 above) based on a large variety of

different input and output measures. For benchmarking the minerals industries, we consider

the use of capital, labour and energy as key inputs and gross output and emissions as

output.

3.3 Benchmarking results

Our benchmarking analysis of the minerals industry identifies the countries that operate at an

efficient scale and are able to produce the highest volumes of outputs with the lowest levels

of emissions from a given set of inputs (output-oriented efficiency measures of technical

efficiency und scale efficiency (see Box 1)). All efficiency estimates are given as indices

ranging from zero to one, where one stands for being efficient. For example, a technical

efficiency score of one for a given country of the sample indicates that in no other country

within our sample the minerals industry produces more outputs from the same combination

of inputs. Likewise, a technical efficiency score below one suggests that at least in one other

country the minerals industry is capable to produce higher outputs from the same inputs.

Similarly, a scale efficiency score equal to one indicates that the country’s minerals industry

is producing at efficient scale while a score of less than one indicates that other countries are

better in utilizing scale economies.




8

Figure 1: Overall efficiency levels (technical efficiency & scale efficiency) of minerals industries in selected countries (in 2007)

Source: DIW econ

Figure 1 shows the outcome of the DEA regarding the overall efficiency levels (technical

efficiency & scale efficiency) of the minerals industries in selected countries. The results for

the technical and scale efficiency are shown in the appendix. The overall performance of the

selected countries is as follows:

In 8 of the 28 countries in the sample (Australia, Canada, Finland, France, Ireland,

Japan, the Netherlands and Slovakia) the minerals industry operates fully efficient.

These countries determine the technology frontier of the international minerals industry in

2007.

Among the inefficient countries, two different subgroups can be identified based on the

additional results for technical efficiency and scale efficiency as shown in the Appendix:

in Germany, the United Kingdom and the United States, the minerals industries are

technically efficient but operate at a too large scale (i.e., underutilization of available

production capacities), while

in Austria, Belgium, Brazil, Czech Republic, Denmark, Hungary, India, Italy, Korea,

Poland, Portugal, Romania, Russia, Spain, Sweden, Turkey and Ukraine, the

minerals industry is also technically inefficiency.




9

For all countries where the minerals industry does not operate at full efficiency, the analysis

provides insights for possible improvements. For example:

The overall efficiency level for the German minerals industry is estimated at 85% due to

operations at an inefficient scale. Likewise, overall efficiency of the British minerals

industry equals 95% due to inefficient scales of operation. This suggests that the

German industry could produce the same output at only 85% of its current scale (i.e. its

current input levels), whereas the British industry could reduce its current input levels by

roughly 5%.

The overall efficiency level for the minerals industry in the Czech Republic is estimated at

55% due to technical inefficiency (technical efficiency score of 0.99, see Appendix) and

inefficient scales of operation (scale efficiency score of 0.56, see Appendix). This

suggests that

the industry could produce the same output at only 55% of its current scale (input

levels), and

given operations at an efficient scale (input levels), output could be increased by 1%

(=1-0.99).

Ukraine only reaches a technical efficiency score of 0.85. In addition, it operates at a too

large scale (scale efficiency 0.65). Thus, overall efficiency only reaches 0.55. As can be seen

in Figure 1, Ukraine belongs to the low performers of the benchmark.

3.4 Implications for the minerals industry of Ukraine

The DEA identifies peer countries for each inefficient country. For Ukraine, Finland and the

Netherlands, which both operate fully efficient, are identified as peer countries. However the

applied DEA is fairly coarse as it does not take into account the structural characteristics of

the minerals industries of the countries. Hence, an additional approach to identify peer

countries is to analyze the output composition and to determine those countries as peer

countries that have a similar structure and are either overall efficient or at least technically

efficient.




10

Figure 2: Structural characteristics of the minerals industry in different countries

a) Output composition in kilotons

Source: DIW econ

b) Structure of minerals manufacturing

Source: DIW econ




11

The most relevant structural characteristics of the minerals industries across the different

countries are shown in Figure 29. Figure 2 a) gives a first impression of the total output of the

non-metallic minerals production. All 21 countries shown in the figure produce clinker. With

the exception of the Netherlands all countries produce lime. Soda ash is only produced by 10

countries (i.e. France, Germany, Italy, Japan, the Netherlands, Portugal, Spain, Romania,

Russia, and Ukraine).

More important than the total production output of the minerals industry is its structure

(Figure 2 b). Ukraine’s output composition is made up of 63% of clinker, 26% of lime, 7% of

glass and 5% of soda ash. The only other countries that produce all 4 products are France,

Germany, Italy, Japan, Portugal, Spain, Romania and Russia. France, Germany, Romania

and Russia have a very similar output composition to the one of Ukraine, whereas the output

composition in Italy, Japan, Portugal and Spain is only slightly similar to the one of Ukraine.

The results of this comparison are summarised in Table 2. Out of the group of countries with

very similar output composition to the one of Ukraine (i.e. France, Germany, Romania and

Russia), France is overall efficient and Germany is technically efficient. With respect to the

slighter similar countries, (i.e. Italy, Japan, Portugal and Spain), only Japan is overall

efficient. All other countries identified as very similar or slightly similar to Ukraine in terms of

output composition are operating at an inefficient scale.

9 For Australia, Brazil, Canada, India, Korea, Turkey and USA no complete production data is available, therefore they will not be part of the further analysis.




12

Table 2: Comparing the minerals industry of Ukraine with other countries

2007 Countries with a

structurally similar output composition

Efficiency score

(technical efficiency) (overall efficiency)

Austria 0.97 0.84

Belgium 0.96 0.95

Czech Republic 0.99 0.55

Denmark 0.99 0.97

Finland 1.00 1.00

France X 1.00 1.00

Germany X 1.00 0.85

Hungary 0.99 0.77

Ireland 1.00 1.00

Italy x 0.91 0.68

Japan x 1.00 1.00

Netherlands 1.00 1.00

Poland 0.93 0.74

Portugal x 0.95 0.60

Romania X 0.97 0.97

Russia X 0.92 0.87

Slovakia 1.00 1.00

Spain x 0.85 0.71

Sweden 1.00 1.00

United Kingdom 1.00 0.95

Key Strong similarity

Slight similarity

Source: DIW econ

The following countries come into consideration as peer countries for identifying sustainable

and economically viable technology options for the Ukrainian minerals industry.

Purely based on the efficiency benchmarking (DEA)

Finland,

Netherlands,

Based on the efficiency benchmarking (DEA) as well as on similarity of output structure

France,

Germany,

Japan.




13

Figure 3 presents the indicators of emission intensity (CO2-eq per volume of production) and

economic viability (revenue per capital stock). The reversed direction of the bars for emission

intensity illustrates that emissions are an undesired output.

Figure 3: Comparison of Ukraine with peer countries

Source: DIW econ

The countries identified as peer countries differ in their emission intensity and economic

viability, which is also caused by different structural characteristics. France and the

Netherlands show similar performances in economic viability but the Netherlands have a

lower emission intensity. Japan shows the worst performance with respect to economic

viability but has the second lowest emission intensity out of this sample of peer countries.

Finland shows the best performance in economic viability as well as in sustainability. With

exception of Germany, which is only technically efficient, all peer countries for Ukraine

operate fully efficient. In 2007, emissions per unit of production in the minerals industries in

Ukraine were 35% higher than in Finland, illustrating a great difference in the technology

levels between Finland and Ukraine in this sector. This shows that there is a very high




14

potential of saving emissions in Ukraine which would allow abating 8.2 Mt10 CO2 equivalents

per year.

4. Benchmarking the chemicals and chemical

products industry in Ukraine

A benchmark like the one implemented for the non-metallic mineral products industry can

also be applied to the chemicals and chemical products industry in Ukraine. The same

relationships between the inputs (i.e. labour, capital and energy) and the outputs (gross

output, greenhouse gas (GHG) emissions and chemicals and chemical products) are of

interest. For ease of notation the chemicals and chemical products industry will henceforth

be referred to as chemicals industry.

4.1 Database

As described above the two main sources providing data, now on the chemicals industry in

different countries are:

the World Input Output Database (WIOD) which has been compiled by a consortium

of scientific organizations with financial support of the European Union11, and

the National Inventory Submissions 2013, United Nations Framework Convention on

Climate Change (UNFCCC)12.

For the analysis of the chemicals industry 21 EU countries and 11 non-EU countries are

included in the database (as listed in Table 3 below) for which the following information is

available:

GHG emissions (in thousand tonnes of CO2 equivalent, source: UNFCCC13),

Fuel combustion (in TJ, source: UNFCCC14),

Gross output (in millions of US dollars, source: wiod.org),

10 35% of 46 Mt CO2 equivalent emitted in the minerals industry in Ukraine in 2007.

11 http://www.wiod.org/

12http://unfccc.int/national_reports/annex_i_ghg_inventories/national_inventories_submissions/items/7383.php

13 For countries not included in UNFCCC database and for the USA, data from WIOD was taken

14 For countries not included in UNFCCC database and for the USA, data from WIOD was taken

http://www.wiod.org/




15

Number of persons employed (in thousand persons, source: wiod.org),

Real fixed capital stock (in millions of US dollars, source: wiod.org),

Unfortunately, there is no complete database on production data (physical output) for

chemicals or chemical products. The UNFCCC database provides production data for 28 of

the 32 countries on different chemicals. However, due to confidentiality it is incomplete. The

United States Geological Survey (USGS) Mineral Resources Program provides data on

Ammonia but no data for any other relevant chemicals. Alternative data sources are the

Eurostat Production of Manufacturing Goods (Prodcom) database15, the Eurostat Structural

Business Statistics (SBS)16 or the OECD Structural Analysis (STAN) database17. The

Prodcom database provides data for the 28 EU countries plus Iceland, Norway and Turkey

for different chemicals. The Eurostat SBS database provides data for the 28 EU countries

plus Albania, FYR of Macedonia, Norway and Switzerland on various industries that are

based on the statistical classification of economic activities. The STAN database provides

data for 32 OECD countries and various industries based on the ISIC standard. The last two

databases only provide data in monetary outputs. For all mentioned databases the problem

of confidentiality arises so that no representative database can be provided.

4.2 Benchmarking results

Due to the lack of detailed production data, a structural comparison of the sector is not

possible. Nevertheless it is possible to identify the efficient countries in a first step of the

analysis. Table 3 gives an overview of the performance of the different countries in the

chemicals industry. Because of the lack of production data there is only one column for the

sustainable performance (column i) and one for the economic viability (column ii). In addition,

the third column contains a ratio on emissions per energy use. For ease of comparison the

three top performers in each column are shaded in grey. With respect to the sustainable

indicator Italy, Slovenia and Sweden show top performance, while China, France and Turkey

are the best countries with regard to economic viability. The lowest emissions per energy

used are in Korea, Slovenia and the USA. The gap between Ukraine and the top performers

in the chemicals industry is fairly large.

15 NACE Rev. 2 version http://epp.eurostat.ec.europa.eu/portal/page/portal/prodcom/data/database

16 Annual detailed enterprise statistics on manufacturing, NACE Rev. 1.1 D http://epp.eurostat.ec.europa.eu/portal/page/portal/european_business/data/database

17 ISIC Rev. 3 version of STAN http://www.oecd.org/industry/ind/stanstructuralanalysisdatabase.htm




16

Table 3: Comparison of different countries in the chemical industry, year 2007

2007 Emissions per

revenue Revenue per capital

stock Emissions per

Energy use

(tons of CO2-e per thousand US-$) (US-$ per US-$)

kilotons CO2-eq per TJ Energy

(i) (ii) (iii)

Australia 0.85 0.90 0.14

Austria 0.17 1.76 0.09

Belgium 0.30 1.67 0.09

Brazil 0.41 0.79 0.07

Bulgaria 2.40 2.21 0.10

Canada 0.41 2.11 0.10

China 0.79 3.73 0.07

Czech Republic 1.65 1.23 0.10

Estonia 1.30 1.73 0.16

Finland 0.40 1.79 0.20

France 0.19 3.96 0.09

Germany 0.21 1.80 0.07

Greece 0.44 1.76 0.09

Hungary 1.06 0.48 0.15

India 0.80 0.92 0.11

Italy 0.16 1.33 0.08

Japan 0.22 0.81 0.07

Korea 0.18 2.53 0.05

Lithuania 6.13 1.69 2.26

Netherlands 0.43 2.09 0.10

Poland 0.80 2.21 0.20

Portugal 0.52 1.58 0.10

Romania 2.96 1.82 0.13

Russia 1.45 1.38 0.25

Slovakia 1.32 2.21 0.12

Slovenia 0.11 1.31 0.06

Spain 0.23 1.60 0.07

Sweden 0.09 1.85 0.06

Turkey 0.18 3.09 0.22

Ukraine 1.83 1.06 0.12

United Kingdom 0.25 1.31 0.10

United States of America 0.38 1.84 0.05

Source: DIW econ based on wiod.org, UNFCCC,

State Statistics Service of Ukraine




17

Here it also occurs that the comparison of single indicators does not allow any conclusion on

the overall performance. Of interest is the ideal combination of sustainable performance and

economic viability. For this reason the DEA is applied again, defining capital, energy and

labour as key inputs and gross output and emissions as output. Figure 4 presents the results

of the DEA for the overall score.

Figure 4: Overall efficiency levels for chemical industries in selected countries (in 2007)

Source: DIW econ

The results of the DEA concerning the overall efficiency are shown in Figure 4. Out of the 32

countries of the sample only four countries are overall efficient (i.e. Estonia, France,

Lithuania and Turkey). As can be seen in Figure 5 the technical efficiency scores are very

similar (with the exception of India all countries have a score above 0.9). Although Ukraine

has a score of 0.93 it still belongs to the lower third. This indicates that there still is a huge

potential for improvement regarding the technology level. The fairly low score of scale

efficiency is an indicator for a great underutilization of available production capacity in this

sector. The low scale efficiency of 0.30 leads to a low overall efficiency score of 0.28. (The

results of the scale efficiency can be seen in the Appendix)




18

Figure 5: Technical efficiency levels for chemical industries in selected countries (in 2007)

Source: DIW econ

4.3 Implications for the chemical industry of Ukraine

Since the chemical industry is a very heterogeneous industry, emissions per output are not a

useful indicator for the emission savings potentials. Therefore, the savings potentials are

calculated directly from the DEA. The DEA identifies Slovenia and Sweden as peer countries

for Ukraine. Both countries are only technically efficient because they operate at too large

scale (scale efficiency: Slovenia 0.95, Sweden 0.98). Nevertheless, both countries could be

used as peer countries for the technology levels.

The technical efficiency score of the chemical industry in Ukraine amounts to 0.93 and

indicates that given current input levels output levels need to increase by 7 percent to reach

technical efficiency. This implies an emissions reduction potential for the chemical industry in

Ukraine of around 1.3 Mt18 CO2 equivalents per year (see Figure 6) which can be achieved

through technical improvements for which Slovenia and Sweden could serve as an example.

The scale efficiency of 0.30 indicates that the savings potential through structural

adjustments amounts to 70 percent of the current input level. Through improving the scale

efficiency there is an even larger potential of saving emissions for the chemical industry in

18 7% of 19 Mt CO2 equivalent emitted in the minerals industry in Ukraine in 2007.




19

Ukraine which would allow abating 13.6 Mt19 CO2 equivalents per year. This high reduction

potential is the result of a fairly coarse DEA as it is based on highly aggregated data. This

entails that the chemical industries of the different countries are treated alike, not taking into

account the structural differences of the chemical industries. This is in particular relevant for

the manufacturing process of chemicals as, for example, basic chemicals are very energy

intensive. The determined emission savings potential of 7% through technical improvement

can be seen as a minimum reduction potential.20 The very low scale efficiency indicates

additional emissions avoidance potential through scale adjustments. However, to quantify

this potential we need to take into account the structural differences of the chemical industry

in a further, more detailed analysis.

Figure 6: Emissions saving potential for the chemical industry in 2007 in Gg

Source: DIW econ

19 70% of 19 Mt CO2 equivalent emitted in the chemical industry in Ukraine in 2007.

20 Note that relative to other countries in our sample, Ukraine is among the countries with lowest

efficiency score, i.e. highest potential for emission reduction (see Figure 5).




20

5. Conclusions and outlook

The developed international benchmark takes into account environmental sustainability and

economic viability. Thus, it is possible to not only identify countries that have a good

performance in single aspects of efficiency like emissions intensity or profitability, but also to

determine those countries that have the best combination of sustainability and economic

viability. The combined performance can be measured using the economic concept of

efficiency for a given industry in different countries and used for comparison. The structure of

the respective sector plays an important role in this process.

An even more detailed analysis of the sector especially concerning the subsectors and their

influence on the efficiency score should be carried out. Here it is necessary to establish a

representative database on chemical products. The development of the benchmark over time

should also be analysed.




21

References

Colli, Timothy j., et al (2005): An Introduction to Efficiency and Productivity Analysis. Second

Edition, United States of America: Springer

Intergovernmental Panel on Climate Change (IPPC) (1996): Guidelines for National

Greenhouse Gas Inventories http://www.ipcc-nggip.iges.or.jp/public/gl/invs1.html

Intergovernmental Panel on Climate Change (IPPC) (2006): Guidelines for National

Greenhouse Gas Inventories http://www.ipcc-nggip.iges.or.jp/public/2006gl/index.html

Organisation for Economic Co-operation and Development (OECD) (2013): SDBS Structural

Business Statistics (ISIC Rev 3), http://stats.oecd.org/Index.aspx?DataSetCode=SSIS_BSC

United Nations Framework Convention on Climate Change (UNFCCC) (2013): Annex I Party

GHG Inventory Submissions

http://unfccc.int/national_reports/annex_i_ghg_inventories/national_inventories_submissions/

items/7383.php

United Nations Framework Convention on Climate Change (UNFCCC) (2006): Updated

UNFCCC reporting guidelines on annual inventories following incorporation of the provisions

of decision 14/CP.11 http://unfccc.int/resource/docs/2006/sbsta/eng/09.pdf

United States Geological Survey (USGS): Mineral Resources Program: Minerals Yearbook,

http://minerals.usgs.gov/minerals/pubs/myb.html

World Input Output Database (WIOD) (2012): Environmental Accounts

http://www.wiod.org/database/ea.htm

World Input Output Database (WIOD) (2012): Socio-Economic Accounts

http://www.wiod.org/database/sea.htm

World Input Output Database (WIOD) (2012): Contents, Sources and Methods, Version 0.9

http://www.wiod.org/database/index.htm

http://www.ipcc-nggip.iges.or.jp/public/gl/invs1.html

http://www.ipcc-nggip.iges.or.jp/public/2006gl/index.html

http://stats.oecd.org/Index.aspx?DataSetCode=SSIS_BSC

http://unfccc.int/national_reports/annex_i_ghg_inventories/national_inventories_submissions/items/7383.php

http://unfccc.int/national_reports/annex_i_ghg_inventories/national_inventories_submissions/items/7383.php

http://unfccc.int/resource/docs/2006/sbsta/eng/09.pdf

http://minerals.usgs.gov/minerals/pubs/myb.html

http://www.wiod.org/database/ea.htm

http://www.wiod.org/database/sea.htm

http://www.wiod.org/database/index.htm




22

Appendix

Figure A1: Technical efficiency levels of minerals industries in selected countries (in 2007)

Source: DIW econ

Figure A2: Scale efficiency levels of minerals industries in selected countries (in 2007)

Source: DIW econ




23

Figure A3: Scale efficiency levels of chemical industries in selected countries (in 2007)

Source: DIW econ

Documents

Benchmarking for sustainable and economically viable technology … ECON... · 2013. 11. 7. · Clinker is an intermediate product in the production of cement and is made of limestone