Economic tools in LCA – Life cycle costing, external costs and cost‑benefit analysis

An introduction to the technique of life cycle costing (LCC). The objective and scope of LCC are illustrated with case studies. Macroeconomic concepts with relevance for LCA. Economic and social externalities and their consistent treatment in LCA and Cost-Benefit Analysis.

The course

Subject:

  • Basic economic concepts with relevance for LCC and LCA. Definition and types of LCC and comparisons with CBA. Integration of LCC and LCA.
  • Data sources for LCC and CBA, added values, prices, taxes and subsidies.
  • Interpretation of LCC results and the identification of hotspots.
  • Distinction between biophysical, economic and social externalities. Cost shifting and accounting for externalities in LCA and CBA.
  • Monetary valuation methods, their suitability for different applications.
  • Interpretation of LCC results and monetarised externalities, using the E2 vector to evaluate the product system for hotspots with low added value and high external costs.
  • Discounting, its rationale and the choice of discount rates in economic, social and environmental contexts.
  • The distribution of incomes and external costs on social groups. Exercise using a simple database. The use of marginal utility in decision support.
  • Sensitivity analysis and uncertainties.
  • The limitations of monetary valuation and economic analysis in LCA.
  • The critique from ecological economics.
  • Communicating the results of LCC and monetary valuation to LCA experts and decision makers.

Form and academic recognition:

Form: 10 hours lectures, 10 hours workshops/exercises.
Academic recognition: 2 ECTS-point including pre-course reading

Learning outcomes:

Understanding the basics of LCC and cost shifting across the life cycles of products and socio-economic classes. Ability to quantify life cycle cost and integrate in a consistent way in LCA using a simple input-output database. Understanding the concepts of economic, social and environmental externalities and the procedures and problems of monetary valuation. Ability to interpret the results of LCC, eco-efficiency analysis and Cost-Benefit Analysis in light of uncertainties. Understanding the rationale for discounting. Ability to argue for a specific choice of discount rate and to discount an assessment result. Ability to integrate distributional effects in an LCA result using a simple input-output database with socio-economic data. Understanding the challenges in communicating results of using LCC, monetary valuation and other economic tools in LCA.

Participant prerequisites:

Bachelor degree or equivalent. Must bring own laptop computer.