Geology Reference
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Reflection: If the aim is to rank energy saving operations, this principle is also
known as the “Law of Savings-Investment”. It was formerly proposed by (Valero
et al., 1986) and later elaborated in Naredo and Valero (1999) and is representative
of the Pareto principle
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. It is a rule that doesn't require a demonstration of its
universal truth. That does not mean however that it fails to provide an illustration
of the environmental deterioration that occurs at the hands of socio-economic deve-
lopment. Applied in this case, the rule shows the asymmetry between the physical
costs of obtaining a given commodity and its assigned price from the cradle to grave
in the financial markets. The relationship between the physical cost and price is an
empirical one that can be made to fit the following saturation curve:
k = 1 e
p
(16.1)
where k and p represent the percentage of physical cost (measured in physical units)
and of price (measured in monetary units) of the intermediate products in relation
to the final one. The coe
cient of elasticity, , indicates the speed at which the
physical cost of the intermediary product reaches 100% of the energy used in the
manufacture of the final product.
If one considers three products made of homogeneous materials like for example
a sheet of printing paper, a plastic bottle or an aluminium can, one can observe
that a sheet of paper has the greatest saturation, indicative of the fact that it has
limited value until relevant information is printed on it (see Fig. 16.1). It is the
information that carries the weight of importance and pays the financial dividends.
The physical costs, such as the cutting of trees, their translocation from where
they fell to the pulp factory, paper production and transportation to the consumer,
are all activities of insignificant economic value. At the other end of the scale,
is the plastic bottle, where production could almost occur in the refinery as it
only involves minor manufacturing processes starting from crude oil, going on to
producing a monomer and later a polymer which is then shaped into a bottle. For
this reason, the market price is a reasonable reflection of the physical costs of the
raw materials used. Intermediate cases would be those of the aluminium can or the
glass bottle.
The curve is also indicative of the exchanges that occur among nations and
territories as pointed out by Naredo in (Naredo and Valero, 1999). The developed
world, its management, its commerce and service industries, occupy the “clean”
phases of product design and commercialisation with high added value per physical
unit cost (meaning that they are situated in the saturated part of the curve). Those
countries on the road to development are more dependent on agriculture and basic
industries and have the “dirtier” task of extracting raw materials and manufacturing
them, with little in the way of added value (meaning they are situated in the initial
part of the curve).
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Also known as 80-20 rule, stating that 80% of the effects come from 20% of the causes, a
relationship first discovered by Pareto (1895).
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