# Eco-costs

Fig 1: Calculation structure of the eco-costs 2012.

Eco-costs are a measure to express the amount of environmental burden of a product on the basis of prevention of that burden. They are the costs which should be made to reduce the environmental pollution and materials depletion in our world to a level which is in line with the carrying capacity of our earth.
For example: for each 1000 kg CO2 emission, one should invest € 135,- in offshore windmill parks (and the other CO2 reduction systems at that price or less). When this is done consequently, the total CO2 emissions in the world will be reduced by 65% compared to the emissions in 2008. As a result global warming will stabilise. In short: "the eco-costs of 1000kg CO2 are € 135,-".
Similar calculations can be made on the environmental burden of acidification, eutrification, summer smog, fine dust, eco-toxicity, and the use of metals, rare earth, fossil fuels, water and land (nature). As such, the eco-costs are virtual costs, since they are not yet integrated in the real life costs of current production chains (Life Cycle Costs). The eco-costs should be regarded as hidden obligations.
The eco-costs of a product are the sum of all eco-costs of emissions and use of resources during the life cycle "from cradle to cradle". The widely accepted method to make such a calculation is called Life Cycle Assessment (LCA), which is basically a mass and energy balance, defined in the 14040 and ISO 14044.

The practical use of eco-costs is to compare the sustainability of several product types with the same functionality. The advantage of eco-costs is that they are expressed in a standardized monetary value (€) which appears to be easily understood ‘by instinct’. Also the calculation is transparent and relatively easy, compared to damage based models which have the disadvantage of extremely complex calculations with subjective weighting of the various aspects contributing to the overall environmental burden.[1][2]

The system of eco-costs is part of the bigger model of the Ecocosts/Value Ratio, EVR[3]

## Background information

Fig 2: Eco-costs are based on marginal prevention costs at the no-effect-level (the costs in euro/kg of the technical measure) .

The eco-costs system has been introduced in 1999 on conferences, and published in 2000-2004 in the International Journal of LCA,[4][5] and in the Journal of Cleaner Production.[6][7] In 2007 the system has been updated, and published in 2010.[8] It is planned to update the system every 5 years to incorporate the latest developments in science. In the summer of 2012 a new update has been released.
The concept of eco-costs has been made operational with general databases, and is described at www.ecocostsvalue.com of the Delft University of Technology.
The method of the eco-costs is based on the sum of the marginal prevention costs (end of pipe as well as system integrated) for toxic emissions related to human health as well as ecosystems, emissions that cause global warming, and resource depletion (metals, rare earth, fossil fuels, water, and land-use). For a visual display of the system see Figure 1.

Marginal prevention costs of toxic emissions are derived from the so called prevention curve as depicted in Figure 2. The basic idea behind such a curve is that a country (or a group of countries, such as the European Union), must take prevention measures to reduce toxic emissions (more than one measure is required to reach the target). From the point of view of the economy, the cheapest measures (in terms of euro/kg) are taken first. At a certain point at the curve, the reduction of the emissions is sufficient to bring the concentration of the pollution below the so called no-effect-level. The no-effect-level of CO2 emissions is the level that the emissions and the natural absorption of the earth are in equilibrium again at a maximum temperature rise of 2 degrees C. The no-effect-level of a toxic emission is the level where the concentration in nature is well below the toxicity threshold (most natural toxic substances have a toxicity threshold, below which they might even have a beneficial effect), or below the background level. For human toxicity the 'no-observed-adverse-effect level' is used. The eco-costs are the marginal prevention costs of the last measure of the prevention curve to reach the no-effect-level. See the abovementioned references 4 and 8 for a full description of the calculation method (note that in the calculation 'classes' of emissions with the same ‘midpoint’ are combined, as explained below).

The classical way to calculate a 'single indicator' in LCA is based on the damage of the emissions. Pollutants are grouped in 'classes', multiplied by a 'characterisation' factor to account for their relative importance within a class, and totalised to the level of their 'midpoint' effect (global warming, acidification, nutrification, etc.). The classical problem is then to determine the relative importance of each midpoint effect. This is done by 'normalisation' (= comparison with the pollution in a country or a region) and 'weighting' (= giving each midpoint a weight, to take the relative importance into account) by an expert panel.

The calculation of the eco-costs is based on classification and characterisation tables as well (combining tables from IPCC ([2]), the USEtox model (usetox.org), tables of ReCiPe ([3]), the ILCD ([4]), and RiskPoll ([5])), however has a different approach to the normalisation and weighting steps. Normalisation is done by calculating the marginal prevention costs for a region (i.e. the European Union), as described above. The weighting step is not required in the eco-costs system, since the total result is the sum of the eco-costs of all midpoints. The advantage of such a calculation is that the marginal prevention costs are related to the cost of the most expensive Best Available Technology which is needed to meet the target, and the corresponding level of Tradable Emission Rights which is required in future. Example: For reduction of CO2 emissions to a sustainable level, the marginal prevention costs are the costs of replacement of coal-fired power plants by windmill parks at the sea.

The eco-costs have been calculated for the situation in the European Union. It might be argued that the eco-costs are also an indication of the marginal prevention costs for other parts of the globe, under the condition of a level playing field for production companies.

## Eco-costs 2012

The method of the eco-costs 2012 (version 2.00) comprises tables of over 3000 emissions, and has been made operational by special database for Simapro, based on LCIs from Ecoinvent v3 and Idemat 2012 (over 9000 materials and processes), and a database for CES (Cambridge Engineering Selector). Excel look-up tables are provided at www.ecocostsvalue.com.

For emissions of toxic substances, the following set of multipliers (marginal prevention costs) is used in the eco-costs 2012 system:

 eco-costs of acidification 8.25 €/kg SOx equivalent eco-costs of eutrophication 3.90 €/kg phosphate equivalent eco-costs of ecotoxicity 55.0 €/kg Zn equivalent eco-costs of human toxicity 36.0 €/kg Benzo(a)pyrene equivalent eco-costs of summer smog (respiratory diseases) 9.70 €/kg C2H4 equivalent eco-costs of fine dust 34.0 €/kg fine dust PM2.5 eco-costs of global warming (GWP 100) 0.135 €/kg CO2 equivalent

The characterisation ('midpoint') tables which are applied in the eco-costs 2012 system, are recommended by the ILCD:[9]

• IPPC 2007, 100 years, for greenhouse gasses
• USETOX, for human toxicity (carcinogens), and ecotoxicity
• RECIPE, for eutrification, and photochemical oxidant formation (summer smog)
• ILCD, for acidification
• RiskPoll, for fine dust

In addition to abovementioned eco-costs for emissions, there is a set of eco-costs to characterize the 'midpoints' of resource depletion:

• eco-costs of abiotic depletion (metals, including rare earth, and fossil fuels)
• eco-costs of land-use change (based on loss of biodiversity, e.g. used for eco-costs of tropical hardwood)
• eco-costs of water (based on the midpoint Water Stress Indicator - WSI - of countries [10])
• eco-costs of landfill

The abovementioned marginal prevention costs at midpoint level can be combined to 'endpoints' in three groups, plus global warming as a separate group:

 eco-costs of human health = the sum of carcinogens, summer smog, fine dust eco-costs of ecosystems = the sum of acidification, eutrophication, ecotoxicity eco-costs of resource depletion = the sum of abiotic depletion, land-use, water, and land-fill eco-costs of global warming = the sum of CO2 and other greenhouse gases (the GWP 100 table) total eco-costs = the sum of human health, ecosystems, resource depletion and global warming

Since the endpoints have the same monetary unit (e.g. euro, dollar), they are added up to the total eco-costs without applying a 'subjective' weighting system. This is an advantage of the eco-costs system (see also ISO 14044 section 4.4.3.4 and 4.4.5). So called 'double counting' (ISO 14044 section 4.4.2.2.3) is avoided in the eco-costs system.

The eco-costs of global warming (also called eco-costs of carbon footprint) can be used as an indicator for the carbon footprint. The eco-costs of resource depletion can be regarded as an indicator for 'circularity' in the theory of the circular economy. However, it is advised to include human toxicity and eco-toxicity, and include the eco-costs of global warming in the calculations on the circular economy as well. The eco-costs of global warming are required to reveal the difference between fossil-based products and bio-based products, since biogenic CO2 is not counted in LCA (biogenic CO2 is part of the natural recycle loop in the biosphere). Therefore, total eco-costs can be regarded as a robust indicator for cradle-to-cradle calculations in LCA for products and services in the theory of the circular economy. Since the economic viability of a business model is also an important aspect of the circular economy, the added value of a product-service system should be part of the analysis. This requires the two dimensional approach of Eco-efficient Value Creation [11]as described at the Wikipedia page on the model of the Ecocosts/Value Ratio, EVR.

The Delft University of Technology is working on a Version 3.00 of the eco-costs 2012. In this version, metrics on social aspects of the production chain will be added. Aspects are the low minimum wages in developing countries (the "wage deficit"), the aspect of "child labour and extreme poverty", and the aspect of "OSH (Occupational Safety and Health)".

## Prevention costs versus Damage costs

Prevention measures will decrease the costs of the damage, related to environmental pollution (e.g. damage costs related to human health problems in terms of DALYs). The savings which are a result of the prevention measures are of the same order of magnitude as the costs of prevention. So the total effect of prevention measures on our society is that it results in a better environment at virtually no extra costs, since costs of prevention and costs of savings will level out.

## Discussion

There are many 'single indicators' for LCA. Basically they fall in three categories:

• single issue
• damage based
• prevention based

The best known 'single issue' indicator is the carbon footprint: the total emissions of kg CO2, or kg CO2 equivalent (taking methane and some other greenhouse gasses into account as well). The advantage of a single issue indicator is, that its calculation is simple and transparent, without any complex assumptions. It is easy as well to communicate to the public. The disadvantage is that is ignores the problems caused by other pollutants and it is not suitable for cradle-to-cradle calculations (because materials depletion is not taken into account).
The most common single indicators are damage based. This stems from the period of the 1990s, when LCA was developed to make people aware of the damage of production and consumption. The advantage of damage based single indicators is, that they make people aware of the fact that they should consume less, and make companies aware that they should produce cleaner. The disadvantage is that these damage based systems are very complex, not transparent for others than who make the computer calculations, need many assumptions, and suffer from the subjective weighting procedure at the end. Communication of the result is not easy, since the result is expressed in 'points' (attempts to express the results in money were never very successful, because of methodological flaws and uncertainties).
Prevention based indicators, like the system of the eco-costs, are relatively new. The advantage, in comparison to the damage based systems, is that the calculations are relatively easy and transparent, and that the results can be explained in terms of money and in measures to be taken. The system is focused on the decision taking processes of architects, business people, designers and engineers. The disadvantage is that the system is not focused on the fact that people should consume less.

The eco-costs method is not the only prevention based indicator system. The eco-costs are calculated for the situation of the European Union, but are applicable worldwide under the assumption of a level playing field for business, and under the precautionary principle. There are two other prevention based systems, developed after the introduction of the eco-costs, which are based on the local circumstances of a specific country:

• In the Netherlands, ‘shadow prices’ have been developed in 2004 by TNO/MEP on basis of a local prevention curve: it are the costs of the most expensive prevention measure required by the Dutch government for each midpoint. It is obvious that such costs are relevant for the local companies, but such a shadow price system doesn’t have any meaning outside the Netherlands, since it is not based on the no-effect-level
• In Japan, a group of universities have developed a set of data for maximum abatement costs (MAC, similar to the midpoint multipliers of the eco-costs as given in the previous section), for the Japanese conditions. The development of the MAC method started in 2002 and has been published in 2005.[12] The so-called avoidable abatement cost (AAC) in this method is comparable to the eco-costs.

## Four available databases

```  - an excel table with data on emissions and materials depletion (more than 3000 substances), see
- an excel table on products and processes, based on Ecoinvent LCIs and Idemat LCIs  (more than 6000 lines), see
```
• an import Simapro database for the method and an import Simapro database for Idemat LCIs (software for LCA specialists)
• a database for Cambridge Engineering Selector, Level 2 (software for designers and engineers)
• a dataset for ArchiCAD (software for architects)

## References

1. ^ M. Bengtsson, B. Steen.: Weighting in LCA, approaches and applications. Environmental Progress 2000; 19(2): 101-109
2. ^ G. Finnveden; On the Limitations of Life Cycle Assessment and Environmental Systems Analysis Tools in General. Int. J. LCA 5, pp 229-238, 2000
3. ^ J.G. Vogtländer;EVR, LCA-based assessment of sustainability , VSSD, 2010
4. ^ J.G. Vogtländer, A. Bijma;The 'virtual pollution costs ‘99', a single LCA-based indicator for emissions , Int. J. LCA, 5 (2), pp.113 –124, 2000
5. ^ J.G. Vogtländer, H.C. Brezet, Ch.F. Hendriks; The Virtual Eco-costs ‘99, a single LCA-based indicator for sustainability and the Eco-costs / Value Ratio (EVR)model for economic allocation, Int. J. LCA, 6 (3) pp 157-166, 2001
6. ^ J.G. Vogtländer, A. Bijma, H. Brezet; Communicating the eco-efficiency of products and services by means of the Eco-costs / Value Model, J. of Cleaner Production Volume 10, 2002, pp. 57-67
7. ^ J.G. Vogtländer, E. Lindeijer, J.-P. M. Witte, Ch. Hendriks; Characterizing the change of land-use based on flora: application for EIA and LCA, J. of Cleaner Production, accepted 2002, Volume 12, Issue 1, February 2004, Pages 47-57
8. ^ J.G. Vogtländer; EVR, LCA-based assessment of sustainability , VSSD, 2010
9. ^ Characterization factors of the ILCD Recommended Life Cycle Impact Assessment methods, ILCD [1]
10. ^ Boulay, Bulle, Bayart, Deschênes, and Margni; Regional Characterization of Freshwater Use in LCA: Modeling Direct Impacts on Human Health; Environmental Science & Technology, 2011, 45, pp 8948 - 8957
11. ^ Joost G. Vogtländer, A. Mestre, R. van der Helm, A. Scheepens and R. Wever; Eco-efficient Value creation, sustainable design and business strategies , VSSD, 2013
12. ^ Tosihiro Oka, Masanobu Ishikawa, Yoshifumi Fujii, Gjalt Huppes; Calculating Cost-effectiveness for Activities with Multiple Environmental Effects Using the Maximum Abatement Cost Method; Journal of Industrial Ecology, Volume 9, Issue 4, pages 97–103, October 2005