Policy Analysis
Environmental Implications of
Service Industries
JEFFREY ROSENBLUM,†
ARPAD HORVATH,‡ AND
C H R I S H E N D R I C K S O N * ,†
Department of Civil and Environmental Engineering,
Carnegie Mellon University, 5000 Forbes Avenue,
Pittsburgh, Pennsylvania 15213-3890, and Department of
Civil and Environmental Engineering, University of
California at Berkeley, Berkeley, California 94720
The service sector in the U.S. economy accounts for
twice the monetary output of manufacturing and is typically
perceived as less damaging to the environment than
manufacturing sectors. We use an Economic InputOutput Life-Cycle Assessment model (EIO-LCA) to assess
both the direct and indirect (supply chain) effects of services
on the economy and the environment. As expected,
environmental emissions and wastes generated directly
by service providers are small per dollar of output, and
energy use per dollar output is lower for services than for
most manufacturing industries. However, with such a
large share of the Gross Domestic Product (GDP), the
impacts of services have become a significant component
of overall U.S. emissions, wastes, and energy consumption.
For several environmental metrics (e.g., hazardous waste
generation), service industries have significant indirect
environmental effects on an economy-wide basis even when
their direct emissions are negligible. When an average
annual “market basket” of goods and services is purchased
by an average consumer in the U.S., the amount spent
on manufactured goods is about 25% greater than that spent
on services, but the environmental effects associated
with manufacturing are about two to three times that of
services. To investigate services in more detail, four
representative service industries were analyzed: trucking
and courier services, retail trade, colleges and universities,
and hotels. Some results are expected, such as the high
direct consumption of electricity, the low direct emission of
toxic chemicals, and the low direct generation of hazardous
wastes. We demonstrate that the supply chain environmental effects associated with these four services are more
significant and merit further consideration. A better
understanding of these impacts will encourage service
providers to consider more carefully the environmental
implications of their supply chain.
Introduction
As economies of industrialized nations are increasingly
becoming service-oriented, more attention to the environ* Corresponding author phone: (412)268-2941; fax: (412)268-7813;
e-mail: [email protected].
† Carnegie Mellon University.
‡ University of California at Berkeley.
10.1021/es9914083 CCC: $19.00
Published on Web 09/28/2000
 2000 American Chemical Society
mental impacts of providing such services is warranted. In
the United States, roughly 60% of the 1996 GDP is associated
with the service sector (which excludes manufacturing,
mining, agriculture, forestry and fishing, government services,
electric, gas, and sanitary services, and transportation) (1).
With transportation, government, electric, gas, and sanitary
services added, this fraction jumps to 80%. Traditional
manufacturing companies are developing a substantial
presence in the service sector, such as the financing,
information technology, and real estate subsidiaries of
automobile companies, and new service domains are emerging, such as e-commerce. Environmental engineering and
policy has tended to focus upon processes with a high
concentration of pollution as measured by emissions to
different media or quantity of emissions per unit of production. Service industries have tended to be ignored in the
formulation of environmental policy because of their relatively low emissions at their point of generation (2). In
addition, services often lack a well-defined unit of production,
so it is difficult to assess their relative performance over time
or between companies.
The service sector can influence environmental performance in some important ways:
1. Influencing suppliers to provide more environmentally
conscious products and services.
2. Reducing resource inputs in their operations such as
through energy efficiency programs and cutting business
travel.
3. Educating consumers about the relative merits of
different products that are offered (particularly in the retail
sales sectors).
4. Reducing resource use on the part of consumers by
substituting more environmentally beneficial services or
activities (e.g., substituting teleconferencing services for
business travel).
Measurement and assessment of these various activities
can be difficult, especially in item 4. For example, telecommuting services might reduce travel but might lead to
increased sprawl as telecommuters opt for ex-urban residences. Measuring the benefits of telecommuting is further
complicated by rebound effects if reduced work-related
commuting time is used for increased pleasure travel (such
as more trips for shopping or vacations).
In this paper, we focus upon item 1 and 2 effects and
attempt to trace both the direct and the indirect supply chain
environmental effects for several important service industries.
In particular, we shall examine the four services described
in Table 1. We selected these as representatives of major
service categories: transportation, trade, education, and
tourism.
Approach: Economic Input-Output Analysis Life-Cycle
Assessment (EIO-LCA). Life-cycle assessment (LCA) is an
appropriate method for systematic assessment and analysis
of the environmental implications of services generation.
Because of its comprehensiveness and public availability of
data, we employed an economic input-output analysisbased LCA approach in this paper (3).
Leontief developed a linearized general equilibrium model
to examine the economy-wide implications of a change in
the output of economic industries (4). Leontief and others
have suggested the incorporation of resource consumption
and environmental discharges into the I-O framework (57) but lacked comprehensive data. Carnegie Mellon University researchers have developed the Economic InputVOL. 34, NO. 22, 2000 / ENVIRONMENTAL SCIENCE & TECHNOLOGY
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TABLE 1. Service Sectors Selected for Detailed Analysis
a
sector
1992 sector output
($ million)
standard industrial
classification (SIC) codesa
trucking and courier services (nonair)
retail trade, except eating and drinking
colleges, universities, and professional schools
hotels
157,105
522,519
43,704
52,407
421, 423
52-57 [excl. *546], 59
822
701
Descriptions available at http://www.osha.gov/oshstats/sicser.html.
TABLE 2. Service Sectors in the 1992 Input-Output Tables
railroads and related services;
local and suburban transit and
interurban highway passenger
transportation;
trucking and courier services,
except air;
warehousing and storage;
water transportation;
air transportation;
pipelines, except natural gas;
freight forwarders and other
transportation services;
arrangement of passenger
transportation;
telephone, telegraph
communications, and
communications services, neca;
cable and other pay television
services;
radio and tv broadcasting;
sanitary services, steam supply,
and irrigation systems;
wholesale trade;
retail trade, except eating and
drinking;
banking;
credit agencies other than banks;
security and commodity brokers;
insurance carriers;
insurance agents, brokers, and
services;
real estate agents, managers,
operators, and lessors;
owner-occupied dwellings;
royalties;
hotels;
other lodging places;
laundry, cleaning, garment
services, and shoe repair;
a
funeral service and crematories;
portrait photographic studios, and
other miscellaneous personal
services;
electrical repair shops;
watch, clock, jewelry, and
furniture repair;
beauty and barber shops;
miscellaneous repair shops;
services to dwellings and other
buildings;
personnel supply services;
computer and data processing
services;
detective and protective services;
miscellaneous equipment rental
and leasing;
photofinishing labs and
commercial photography;
other business services;
management and public relations
services;
research, development, and
testing services, except
noncommercial;
advertising;
legal services;
engineering, architectural, and
surveying services;
accounting, auditing and
bookkeeping, and miscellaneous
services, neca;
eating and drinking places;
automotive rental and leasing,
without drivers;
automotive repair shops and
services;
automobile parking and car
washes;
motion picture services and
theaters;
videotape rental;
theatrical producers (except
motion picture), bands, orchestras
and entertainers;
bowling centers;
professional sports clubs and
promoters;
racing, including track operation;
physical fitness facilities and
membership sports and recreation
clubs;
other amusement and recreation
services;
doctors and dentists;
hospitals;
nursing and personal care
facilities;
other medical and health services;
veterinary services;
other medical and health services;
elementary and secondary schools;
colleges, universities, and
professional schools;
private libraries, vocational
schools, and educational services,
neca;
business associations and
professional membership
organizations;
labor organizations, civic, social,
and fraternal associations;
religious organizations;
other membership organizations;
job training and related services;
child day care services;
residential care;
social services, neca
nec ) not elsewhere classified.
Output Life Cycle Assessment (EIO-LCA) method using U.S.
data (8, 9). The model utilizes the 1992 U.S. Department
ofCommerce I-O technical coefficient matrix (10, 11) in
which the economy is disaggregated into 485 commodity
industries, representing one or more of the four-digit
Standard Industrial Classification (SIC) codes. Services are
comprehensively covered in the 1992 coefficient matrix. (The
1997 tables are expected in 2001.)
EIO-LCA extends the I-O matrix by augmenting it with
vectors of environmental discharge and resource use coefficients by each sector. The industry coefficient is the unit
resource use, emission, or waste per dollar of industry output.
The resource use data include electricity, fuel use, ore (e.g.,
iron and copper), and fertilizer consumption. Total energy
consumption includes electricity and fuels (bituminous and
anthracite coal, natural gas, liquefied natural gas, liquefied
petroleum gas, motor gasoline, kerosene, aviation fuel, jet
fuel, light fuel oil, heavy fuel oil). Environmental discharge
data include some 650 toxic chemical emissions from the
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U.S. Environmental Protection Agency’s (EPA) Toxics Release
Inventory (TRI) to air, water, land, and underground wells
(12), hazardous waste generation amounts from the Resource
Conservation and Recovery Act (RCRA) data set (13), and
some conventional pollutants (e.g., SO2, volatile organic
compounds - VOC). An index of toxicity potential called
CMU-ET is also calculated. CMU-ET weights different
chemical species of emissions using relative toxicity based
on occupational health and safety threshold limit values (TLV)
(14).
The EIO-LCA model captures both the direct and indirect
environmental discharge implications of a simulated change
in demand for a commodity produced by an industry (e.g.,
VOC emissions resulting from a one million dollar change
in demand for the “paints and allied products” industry’s
manufacturing). The direct component is defined as the
environmental emission effect that can be attributed directly
to an industry’s operations (e.g., VOC emissions attributed
the facilities designated as making “paints and allied
FIGURE 1. Relative contribution of the major economic sectors to
the 1992 U.S. economic output (1).
FIGURE 2. Direct and indirect energy use (electricity plus fuels)
by the major sectors of the U.S. economy.
products”.) The indirect component results from a corresponding change in demand for all other industries in the
economy associated with the supply chain for an industry
(e.g., VOC emissions from the industries which supply goods
and services to the “paints and allied products” industry,
and the VOC emissions resulting from their suppliers, then
the suppliers of their suppliers, etc.). In its current form,
using sectoral analysis, EIO-LCA does not provide information
about specific products (e.g., two different brands of paint)
or producers. However, product comparisons using specific
compositions are possible using the Product EIO-LCA
approach (15).
Impacts of Services Compared with Other Major Sectors
of the Economy. Formally, the 485 commodity industries,
as defined by the U.S. Department of Commerce, consist of
manufacturing (352 industries), services (79), construction
(15), agriculture (20), mining (10), and special industries (10).
For this analysis, we grouped the 485 industries into four
sectors: manufacturing, utilities, services, and other. Table
2 lists the I-O commodity industries defined as “services”
here. We grouped “electric services (utilities)”, “natural gas
transportation”, “natural gas distribution”, and “water supply
and sewerage systems” in a “utilities” category as their outputs
are more of a product than a service. The construction,
agriculture, mining, and special industries sectors are
grouped into a category called “other”. Figure 1 shows each
major economic sector’s contribution to the 1992 U.S.
FIGURE 3. Direct and indirect generation of RCRA hazardous wastes
by the major sectors of the U.S. economy.
economic output. Services represent over half of the overall
economy. Note that the total economic output for the U.S.
is higher than the GDP because total output includes material,
energy, etc. costs, while the GDP is an economic indicator
that sums only the value added (employee compensation,
indirect business taxes and property-type income) orsin
another definitionsthe total final demand (largely, domestic
private and government purchases, and exports).
Table 3 compares the impacts of the service industries to
other sectors of the economy for energy use, global warming
TABLE 3. Direct and Indirect Environmental Implications of the Major Sectors of the U.S. Economy
manufacturing
direct
indirect
services
direct
utilities
indirect
other
direct
indirect
direct
11
4.2
610
21
.04
1100
energy
RCRA haz. wastes generated
GWP
For Total Sector Economic Output
(106 Terajoules)
9.9
53
9.8
28
(106 metric tons)
185
170
6.7
75
(106 mt CO2 equiv.) 680
2700
660
2600
21
0.05
1900
energy
RCRA haz. wastes generated
GWP
Per Million Dollars of Economic Output
(Terajoules)
3.4
18
1.8
5.0
(metric tons)
63
58
1.2
13
(mt CO2 equiv)
230
920
120
460
80
0.2
7000
41
16
2300
indirect
12
41
1800
11
.02
580
6.2
21
910
TABLE 4. Selected Environmental Emissions of Major Consumer Spending Categories for $29,850 of Average Consumer Demand
in 1992
total emissions (direct plus indirect)
expenditure
category
manufacturing
services
utility
property rent
$29,851
38%
30%
5%
27%
total (lbs/yr):
CO
NO2
PM10
SO2
VOC
GWP
217
59%
25%
6%
10%
206
46%
15%
31%
8%
25
34%
21%
21%
23%
277
30%
14%
48%
8%
57
63%
25%
6%
7%
80,186
41%
15%
37%
7%
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TABLE 5. Resource Inputs and Environmental Outputs of Four Service Sectors for One Million Dollars of Demand in Each Sector
trucking/
courier
total
electricity
energy
ores
iron ore
copper ore
bauxite
gold ore
(million kWh)
(Terajoules)
0.22
25
(metric ton)
(metric ton)
(metric ton)
(metric ton)
6.6
18
0.72
4.2
TRI total
air
water
land
underground
CMU-ET total
RCRA generated
SO2
NOx
CO
VOC
PM10
GWP
(metric ton)
%
%
%
%
(metric ton)
(metric ton)
(metric ton)
(metric ton)
(metric ton)
(metric ton)
(metric ton)
mt CO2 equiv
0.09
69%
5%
12%
14%
0.11
43
2.1
11
24
4.7
0.18
1700
colleges and
universities
retail trade
% direct
total
Resource Inputs
34%
0.38
56%
8.2
0%
0%
0%
0%
% direct
hotels
% direct
42%
13
total
% direct
0.66
11
86%
12%
81%
22%
0.18
4.4
0%
0%
0%
0%
6.2
23
0.75
4.9
0%
0%
0%
0%
3.6
12
0.57
2.6
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
40%
68%
70%
0%
17%
0.08
69%
5%
9%
16%
0.13
13
1.7
1.3
1.3
0.3
0.56
300
0%
0%
0%
0%
0%
0%
9%
46%
35%
11%
3%
3%
11%
0.08
67%
9%
8%
16%
0.09
14
3.3
2.0
1.2
0.3
0.31
770
0%
0%
0%
0%
0%
0%
0%
10%
6%
1%
2%
4%
7%
3.2
10
0.41
2.3
Environmental Outputs
0%
0.05
0%
73%
0%
6%
0%
8%
0%
13%
0%
0.06
0%
9.4
45%
2.1
87%
2.0
92%
2.7
88%
0.7
0%
0.18
62%
570
total
TABLE 6. Resource Inputs and Environmental Outputs of Four Service Sectors for Total Output of Each Sector
trucking/courier
total
total output
($ million)
% direct
total
157,000
523,000
Resource Inputs
34%
200,000
56%
4,100,000
electricity
energy
ores
iron ore
copper ore
bauxite
gold ore
(million kWh)
(Terajoules)
34,000
3,900,000
(metric ton)
(metric ton)
(metric ton)
(metric ton)
1,000,000
2,800,000
110,000
660,000
TRI total
air
water
land
underground
CMU-ET total
RCRA generated
SO2
NOx
CO
VOC
PM10
GWP
(metric ton)
%
%
%
%
(metric ton)
(metric ton)
(metric ton)
(metric ton)
(metric ton)
(metric ton)
(metric ton)
106 mt CO2 equiv
14,000
69%
5%
12%
14%
18,000
6,80,000
330,000
1,700,000
3,800,000
740,000
28,000
260
0%
0%
0%
0%
1,700,000
5,300,000
210,000
1,180,000
Environmental Outputs
0%
27,000
0%
73%
0%
6%
0%
8%
0%
13%
0%
34,000
0%
4,900,000
45%
1,100,000
87%
1,100,000
92%
1,400,000
88%
360,000
0%
93,000
62%
300
potential (converted to CO2 equivalents), and RCRA hazardous wastes generated. Results are presented for total sector
economic output as well as normalized by million dollars of
output. The service sector contributed about half the direct
energy use and global warming potential and about 50 times
less RCRA generated hazardous wastes compared with the
manufacturing sector on a per million dollar basis. However,
because the service sector has twice the total economic output
compared to manufacturing, the service industries have about
the same energy use and global warming potential as the
manufacturing sector on a total sector economic basis (Figure
2). (Note that the “utility” category has a large energy use
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9
colleges and
universities
retail trade
ENVIRONMENTAL SCIENCE & TECHNOLOGY / VOL. 34, NO. 22, 2000
% direct
total
hotels
% direct
44,000
total
% direct
52,000
81%
22%
8,000
180,000
42%
12%
34,000
540,000
86%
12%
0%
0%
0%
0%
300,000
1,000,000
33,000
210,000
0%
0%
0%
0%
200,000
650,000
30,000
140,000
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
40%
68%
70%
0%
17%
3,600
69%
5%
9%
16%
5,800
570,000
74,000
58,000
56,000
11,000
25,000
13
0%
0%
0%
0%
0%
0%
9%
46%
35%
11%
3%
3%
11%
4,200
67%
9%
8%
16%
4,500
740,000
170,000
100,000
65,000
16,000
16,000
40
0%
0%
0%
0%
0%
0%
0%
10%
6%
1%
2%
4%
7%
contribution because the use of fuels to generate electricity
creates significant direct emissions.)
For some environmental metrics, the contribution of
nonmanufacturing sectors appears significantly smaller. For
example, the manufacturing sector is responsible for the
direct generation of nearly all of the RCRA hazardous wastes
(Figure 3). This does not present the full picture because
service industries are responsible indirectly, through their
supply chain, for a significant amount of RCRA wastes
generated. In general, service industries have significant
environmental effects on an economy-wide basis even when
their direct emissions are negligible. With a large share of
FIGURE 4. Resource inputs and environmental outputs of four service industries for $1 million dollars of demand for each industry.
the economy, the direct and indirect environmental effects
of the service sector become a significant component of
overall U.S. emissions, wastes, and energy use.
Consumer Impacts. The above analyses focus on the
overall environmental effects of the service sector. Indirect
consumption effects are also interesting. The U.S. Consumer
Price Index, a widely recognized economic indicator generated by the Bureau of Labor Statistics, relies on a “market
basket” to determine the goods and services (in about 200
subcategories) purchased by an “average” consumer. The
I-O sector numbers were mapped against each subcategory
(16), and the EIO-LCA model was used to determine the
annual total (direct and indirect) environmental effects of
average U.S. household expenditures ($29,850 in 1992) (17).
The results are presented in Table 4. Each subcategory was
given one of four classifications: manufacturing, service,
utilities, and property rental. Though the amount spent on
manufactured goods is about 25% greater than that spent on
services, the environmental effects associated with manufacturing are about 2-3 times that of services.
Four Service Sectors Analyzed in Detail. To illustrate the
environmental effects of particular service industries, we
selected representatives of four major categories of services
in the U.S. economy: trucking and courier services, retail
trade, colleges and universities, and hotels. The EIO-LCA
model was used to estimate the resource inputs and
environmental outputs, both direct and indirect. A purchase
of one million dollars of services from these four sectors was
simulated. The results are presented in Table 5. To estimate
the total environmental effect of these services, the total
economic outputs were used. Results are shown in Table 6.
Figures 4 and 5 present the findings graphically for selected
environmental metrics.
VOL. 34, NO. 22, 2000 / ENVIRONMENTAL SCIENCE & TECHNOLOGY
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FIGURE 5. Resource inputs and environmental outputs of four service industries using total economic output for each industry.
Some results are expected, such as the high direct
consumption of electricity, the low direct emissions of TRI
toxic chemicals, and the low direct generation of RCRA
hazardous wastes. Indirect impacts of services on resource
use (e.g., iron ore) and environmental emissions (e.g., SO2
emissions, TRI releases) may be substantial and in some
cases comparable to direct manufacturing impacts. For
example, the manufacturing industry “blast furnaces and
steel mills” (the four SIC digit sector that produces steel)
reports direct TRI emissions of 32,000 metric tons, with retail
trade close by with indirect emissions of 27,000 metric tons.
However, the CMU-ET results for steel production (98,000
metric tons) are almost three times higher than for retail
trade (34,000 metric tons) on the account of chemicals of
higher toxicity being used in the steel making process than
in the supply chain of retail trade.
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The supply chain environmental effects associated with
services appear to be significant and merit further consideration. In particular, trucking displays significant direct and
indirect impacts from combustion of fuels, both on a total
and per-dollar basis. Retail trade is a large sector with
significant supply chain resource and energy demands. Hotels
consume significant amounts of electricity directly, though
most of the total energy use is consumed in the supply chain.
Relative to the three other examples, the hotel industry
requires large direct electricity inputs per dollar of output.
Colleges and universities are a relatively small sector with
small direct impacts, except for emissions presumably
associated with laboratory work.
The top five supply chain sectors of the four selected
services for two environmental outputs, total TRI emissions
(to air, water, underground wells, and land) and RCRA
hazardous waste generated, are presented in Table 7. The
TABLE 7. Top Five Supply Chain Sectors Associated with Four Selected Service Sectors
TRI%
RCRA%
Trucking and Courier Services (Nonair)
total
100%
total
petroleum refining
19%
petroleum refining
industrial inorganic and organic chemicals
15%
industrial inorganic and organic chemicals
primary nonferrous metals
14%
sanitary services, steam supply, irrigation
synthetic rubber
8%
warehousing and storage
carbon black
6%
synthetic rubber
100%
64%
14%
14%
3%
1%
Retail Trade, Except Eating and Drinking
total
100%
total
paper and paperboard mills
17%
petroleum refining
industrial inorganic and organic chemicals
14%
industrial inorganic and organic chemicals
primary nonferrous metals
12%
sanitary services, steam supply, irrigation
pulp mills
11%
plastics materials and resins
misc. plastic products
6%
other business services
100%
38%
37%
15%
2%
1%
Colleges, Universities, and Professional Schools
total
100%
total
primary nonferrous metals
17%
industrial inorganic and organic chemicals
industrial inorganic and organic chemicals
16%
petroleum refining
paper and paperboard mills
13%
colleges, universities, and trade schools
pulp mills
8%
sanitary services, steam supply, irrigation
misc. plastic products
4%
pesticides and agricultural chemicals
100%
50%
20%
9%
7%
4%
Hotels
total
nitrogenous and phosphatic fertilizers
industrial inorganic and organic chemicals
primary nonferrous metals
paper and paperboard mills
pulp mills
100%
27%
13%
9%
8%
6%
values represent the percentage of each supply chain sector
of the total (direct plus indirect) environmental effect. Paper
and chemicals production and petroleum refining represent
significant supply chain sectors in terms of overall environmental effects for all four services analyzed. If the four service
industries were to reduce the TRI emissions and the RCRA
hazardous waste generation as a consequence of their
activities and supply chain purchases, paper and chemicals
production and petroleum refining would be targets for
reduction in a program of environmentally optimized supply
chain management.
Discussion
The analysis conducted in this paper provides a macroscopic
view of environmental impacts of resource consumption and
environmental outputs of the service sector of our economy
in general (focusing on a comparison with manufacturing)
as well as a life-cycle environmental assessment of four
representative services in particular. Our major findings
include the following:
(1) Services contribute about twice the economic output
compared with manufacturing, making their overall economywide direct environmental impact in areas such as energy
consumption much more significant than expected when
compared with the effect normalized by output. Thus, the
potential for reducing the environmental effects of services
is significant and warrants increased attention even when
compared with manufacturing.
(2) When assessing and analyzing service industries, the
supply chain effects must be considered along with direct
environmental impacts. This is especially the case for certain
environmental emissions that are not directly associated with
services (e.g., TRI emissions, RCRA hazardous wastes generated) but are significant when indirect supply chain impacts
are considered.
(3) For the four services detailed in this paper, EIO-LCA
can be used to determine where the majority of indirect
total
industrial inorganic and organic chemicals
sanitary services, steam supply, irrigation
petroleum refining
plastics materials and resins
other business services
100%
35%
33%
25%
1%
<1%
supply chain impacts occur. Similar analysis of other service
industries is warranted. Greening the service industries has
to include the greening of their supply chains.
Acknowledgments
The authors wish to acknowledge the support of the National
Science Foundation/Lucent Technologies Industrial Ecology
Fellowship program (BES 9873582), the NSF Structures,
Geomechanics and Building Systems program (Project CMS
9713917), and the Green Design Initiative at Carnegie Mellon
University. Arpad Horvath is grateful for the support of the
AT&T Industrial Ecology Faculty Fellowship.
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Received for review December 17, 1999. Revised manuscript
received July 25, 2000. Accepted August 16, 2000.
ES9914083