Raw material equivalents: The challenges of accounting for sustainability in a globalized world

The indicator domestic material consumption (domestic extraction + imports - exports) is widely used to track the scale, composition, and dynamics of material use. As production increasingly occurs at a spatial distance from the demand it ultimately satisfies, new accounting challenges arise that this indicator may not be able to meet. In response, indicators in raw material equivalents (RME) have been developed to account for material use, no matter where it occurs, associated with final demand. RME indicators are most commonly calculated based on monetary input-output tables with material extensions. The resulting indicators, which are rapidly gaining scientific and political importance, must be interpreted as stemming from a mixed monetary and physical accounting approach. How such an approach differs from a physical accounting approach is shown in this article using an input-output model with a material extension. Neither the physical nor the mixed monetary and physical approach is found to generate results which are incorrect. Instead, the results must be interpreted in light of the assumptions entailed in the approach on which they are based. In making possibilities and limits of interpretation in both cases transparent, RME indicators can more readily be discussed and used by sustainability scientists and practitioners.