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InLCA Session IV B - Weighting & Economic Valuation
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Incorporating Costs in LCA - Methods and Results

Presenter: Karen Shapiro
(slides in pdf)

Karen Shapiro

Tellus Institute
11 Arlington Street
Boston, MA 02116
Phone: 617-266-5400
FAX: 617-266-8303
E-mail: kshapiro@tellus.org


The goal of LCA is to identify the environmental impacts resulting from a product, process, or activity. While LCA is useful for evaluating environmental attributes, it stops short of providing information that business managers routinely utilize for decision-making ­ i.e., dollars. Thus, decisions regarding the processes used for manufacturing products and the materials comprising those products can be enhanced by weaving cost and environmental information into the decision-making process.

Various approaches have been used during the past decade to supplement environmental information with cost information. One of these tools is environmental accounting, the identification, analysis, reporting, and use of environmental information, including environmental cost data. Environmental cost accounting provides information necessary for identifying the true costs of products and processes and for evaluating opportunities to minimize those costs. Many companies are incorporating environmental cost information into their accounting systems to prioritize investments in new technologies and products.

While environmental accounting provides decision-makers with more complete information regarding the costs for which the firm directly bears, it does not include "social" or "societal" costs (also, commonly known as environmental externalities). These are the costs of business' impacts on the environment and society for which they are not legally accountable. Examples of these costs are reduced visibility resulting from air pollutants, increased risk of asthma resulting from residual air emission, or global warming resulting from emissions of greenhouse gases. While valuing these impacts is difficult and controversial, many firms are beginning to include these costs in their decision-making.

This presentation will provide an overview of environmental accounting methods and methods for valuing societal costs, and provide concrete examples of these approaches. The presentation will draw upon Tellus' recent EPA-funded project to develop environmental externality values. These values are being incorporated into a tool being developed under sponsorship of the American Institute of Chemical Engineers' Center for Waste Reduction Technologies. The tool will assist firms in evaluating the true costs of product/process decisions.

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Quantitative Data Quality Assessment for Normalization Reference

Presenter: Sangwon Suh
(slides in pdf)

Sangwon Suh and Kun M. Lee

School of Environmental and Urban Engineering
Ajou University
5 Wonchundong
Suwon, Korea 442-749
Phone: 82 331 219 2405
FAX: 82 331 215 5145
E-mail: suh@cml.leidenuniv.nl
E-mail: kunlee@madang.ajou.ac.kr


Lack of a quantitative tool to assess the data quality of the environmental loads for the calculationof normalization reference (NR) results in a questionable NR. A total of eight impact categories was chosen for the calculation of NR based on the EDIP method, and the data quality was assessed using a method proposed here.

Data quality of the NR of each impact category was assessed in 5 steps. They include: i) grading data quality of each environmental load, ii) multiplying the graded data quality of each environmental load by the fractional contribution of the load to the impact category per data quality indicator (indicator), iii) summing up the graded data quality score of all the loads per indicator iv) calculating the weighted data quality score by applying weight to each indicator, and v) summing up the weighted data quality score of all the indicators.

Five indicators selected include data acquisition method, independence of the data supplier, completeness of the pollutant composition, completeness of the pollution source composition, and the data age. Each indicator has five data quality levels. A total of 22 domestic and international LCA practitioners replied to the survey that determines the grade of each level and the weight of each indicator. The Delphi-like method was applied for the grade determination and the Analytic Hierarchy Process method for the weight determination. The weight of each indicator was 0.28, 0.16, 0.20, 0.21 and 0.14, respectively.

Results of the NRs were compared with those calculated by others based on different methods. Strong points and weak points of the proposed data quality assessment method for NRs were discussed.

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The PIX Module Software: Combining Life Cycle Assessment with Activity Based Costing for Sustained Economic Equilibrium

Presenter: Guerry Grune

Carla O. and Guerry L. Grune

KM Limited Inc.
784 Villier Court
Va. Beach, VA 23452
Phone: 757-486-2088
FAX: 757-486-4312
E-mail: kmlmtd2@pinn.net
Web site: www.kmlmtd.com


A project undertaken by KM Limited was successful in developing the first commercially available software package (tool) - the LCA PIX module - to simultaneously allow the user to perform both Activity Based Costing (ABC) and Life Cycle Assessment (LCA). By using an industrial engineering approach employing drivers and driver values, the model and relational database provides for a unique combination of two strategies which complement and enhance the implementation of an Environmental Management Strategy (EMS). This approach has strong appeal to those involved in any manufacturing sector - the point source for more than 50% of "undesirable effluents" affecting our global climate.

This software tool has been used to compare different products, processes, and services for not only their environemntal burden potential (using different valuation techniques - i.e. selected weighted emphasis on global warming, ozone depletion, acid rain, deforestation, biodiversity, etc.), but also to understand how different techniques can be used to diminish these burdens. Improving internal, external, unseen, or unknown ("hidden") costs is the additional benefit. The software tool, therefore, is multi-functional, in that it:

Until now, the conventional approach to LCA studies has been the application of "simple" mass and energy balances to manufacturing facilities. This "black box" approach is useful in providing guides to cost reduction and large scale industrial changes which can benefit the environment with detailing point-source emissions. However, it requires difficult definitions of system boundaries, time consuming data collection, does not detail the point-source emissions, and severely restricts final inventory calculations. In short, the conventional approach cannot be used to provide a detailed understanding of how to improve a product, process or service. The use of drivers and driver values with associated materials, energy, waste, and transportation activities allows for a complete and accurate finite analysis.

In contrast, the LCA PIX Module provides a stand alone software application which analyzes processes on a product basis, determines environmental load centers, and allows for development of a comprehensive database. The database contains relevant process information in an easily storable exchangeable, and analytical format.

The environmental impact of the prodcut, process, or activity, can be quantified by a number of different "valuation" methods. One recommeded method and database, is the "Environmental Priority Strategy," EPS, which values the impact in terms of an Environmental Load Index, ELI. Other methods of valuation include the Environmental Theme Method, the Tellus Method, and the Ecological Scarcity Method. These and other "impact" databases can be easily implemented due to the relational dB system utilized in the Powerbuilder application.

LCA can be considered a subset of Activity Based Costing / Management, ABC/M, in that the information collected for ABC/M with planning and appropriate development can be simulataneously manipulated. The still evolving EMS ISO 14000 framework together with an ABC approach should yield LCA as a natural consequence (much like Total Quality Management, or TQM, during the evolution of ISO 9000). In essence, before the costs are assigned to the various activities and objects in ABC, much of the information can be used for the LCA analysis.

The software can support multiple internal industrial systems. Each municipality, organization, or corporation which utilizes, produces, or disposes a product has a range of strategic options regarding environmentally responsible and efficient performance.

The LCA PIX Module allows for a quantitative measurement which can indicate the potential burden of any product. Strategic comparisons of product and process choices can then be fairly assessed. The model upon which the LCA PIX module is based allows for extensive flexibility. For example, the product could be the production of a polyolefin poylmer or the bucket molded from the same polyolefin or even the use of an aluminum bucket.

The PIX module includes the development of a framework so that the information collected can be used for both LCA and ABC/M - the valuation steps for each analysis are assigned as Environmental Load Indices for LCA, and costs for ABC.

This tool was designed for the most proactive organizations. The proactive stage of "environmental protection" is a basic principal which is guiding current and future policy makers. This is particularly true for the current policies established by Ms. Carol Browner and the current Environmental Protection Agency (EPA).

(1) EPS = Environmental Protection sTrategy, a public (for sale) database compiled by Chalmers University - Sweden.

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Advances in Normalization and Weighting for North American LCA

Presenter: Gregory Norris

Gregory Norris

Sylvatica
147 Bauneg Hill Rd, Suite 200
North Berwick, ME 03906
Phone: 207-676-7640
FAX: 207-676-7647
E-mail: norris@sylvatica.com


The final two (optional) stages of Life Cycle Impact Assessment are normalization and weighting. These two steps are often useful in providing an overall summary and synthesis of LCIA results to assist decision making and reporting.

European LCA researchers and practitioners have continued to develop and innovate methods (and supporting databases) for normalization and weighting. However, both of these steps have remained controversial and under-explored in the USA for a variety of reasons. Still, due to demands from decisionmakers for LCA results synthesis, some North American LCA tools such as the National Institute of Standards and Technology's "BEES" software have recently incorporated methods for both normalization and weighting.

This talk will review the breadth of methods available for both valuation and weighting in LCA. It will also demonstrate a common pitfall that has arisen in North American examples of combining normalization and weighting. It will demonstrate how this pitfall can be avoided to prevent the unwitting generation of meaningless results.

Finally, the talk will demonstrate the systematic use of decision heuristics as an alternative to traditional LCA approaches to weighting and valuation. These decision heuristics can be applied to arrive at clear-cut decisions from LCA results without having to adopt specific weights for the impact categories. This method offers a way forward in response to what have been two opposing "factions": on one hand, the often loud objections which are raised against the use of weighting, and on the other, user calls for decision support to make sense of the multi-dimensional LCA results.

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Comparative Life Cycle Assessment and Externality Analysis of Biodiesel and Fossil Diesel Fuel

Presenter: An Vercalsteren

Carolin Spirinckx and Leo De Nocker

Vito (Flemish Institute for Technological Research)
Boeretang 200
B-2400 Mol
Belgium (Europe)
Phone: +32-14-33 58 51 (Carolin)
Phone: +32-14-33 58 86 (Leo)
FAX: +32-14-32 11 85
E-mail Carolin: spirincc@vito.be
E-mail Leo: denockel@vito.be


In the context of a demonstration project at Vito on the use of rapeseed methyl ester (RME) or biodiesel as automotive fuel, the environmental impacts of fossil diesel and biodiesel have been compared by means of a life cycle analysis (LCA). Additionally, in the context of projects on the external costs of transport (*), the environmental damages of both fuels are calculated, using an impact pathway analysis based on the European ExternE (Externalities of Energy) methodology. The objective of this presentation is to compare the results of the two methods for evaluation of environmental impacts of RME and conventional diesel. To ensure consistency, the quantification of external costs is based on the emission inventory of the LCA-analysis, taking into account all stages of the life cycle of the two fuels. The externality analysis assesses real impacts (on the other hand LCA assesses potential impacts) and results in a single indicator: damages (costs) to health and the environment. Furthermore, it takes into account the site specificity of the emissions. Because both methods follow a well-established methodology, the scope of impacts assessed is not identical; whereas LCA takes a broader range of environmental impacts into account, the ExternE methodology better reflects the impacts on human health. The comparison illustrates that both methods to assess and evaluate environmental impacts differ a lot but that the results are complementary. The LCA analysis shows that the benefits in terms of greenhouse gas emissions are being compensated by higher other environmental impacts, especially for eutrophication. The external cost analysis shows that external costs of biodiesel and fossil diesel are in the same range (for both fuels dominated by the impacts of the use phase). Both methods share the conclusion that although biodiesel has much lower greenhouse gas emissions, it still has significant impacts on other impact categories.

(*) The methodological research in this framework is financed by the OSTC program on sustainable mobility and by the Joule program of the European Commission.

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Chinese Site-Normalization References for Life Cycle Impact Assessment

Presenter: Jianxin Yang
(slides in pdf)

Jianxin Yang

Research Center for Eco-Environmental Sciences
Chinese Academy of Sciences
19 Zhongguancun Road
Beijing 100080, China
E-mail: yangjx@public.bta.net.cn

Per H. Nielsen

Department of Manufacturing Engineering
Technical University of Denmark,
Building 424
DK-2800 Lyngby, Denmark


According to EDIP methodology[1], normalization in the phase of Life Cycle Impact Assessment is trying to answer how great the potentials for impacts on the environment are relative to the impact from society's activities as a whole? (how much does the product e.g. contribute to nutrient enrichment compared with an average persons yearly contribution?). Thus, normalization references are required, which depend on the actual emissions in specific countries/areas.

According to Chinese industrial development intensity and population density, China was divided into three regions and the normalization references for each region were calculated on the basis of an inventory of all three region's activities in 1990. The normalization references were determined by two methods. One is defined as the person equivalent (same as EDIP's), i.e. total environmental impact potential for the area in question in 1990 divided by the population in the area in question. The other is defined as the area equivalent, i.e. total environmental impact potential for the area in question in 1990 divided by the territory area only in the area in question. The site-specific reference is considered due to the potential environmental impacts for the product under assessment are of considerable significance in the specific regions.

For the global environmental impacts, the normalization references are globally valid and calculated based on literature[1]. For the other regional and local impacts, the normalization references are calculated or estimated based on Chinese measured or estimated data. The references for global warming, ozone depletion, acidification, nutrient enrichment, bulk waste, hazardous waste, slag and ashes are determined.

The person-equivalent references show little difference between regions. However, the area-equivalent references well reflect the regional variance. A sample impact assessment comparison is made based on the national and three regional normalization references (area equivalent).

References:

1. Wenzel, H., Hauschild, and Alting, L. (1997): Environmental assessment of products. Volume 1: methodology, tools and case studies in product development. Chapman & Hall. London, United Kingdom.


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