an industrial estate). Depending on the time horizon, these issues may be approached descriptively (permits, annual environmental reports) or strategically (policy decisions, planning). With these ‘transverse’ issues, the questions addressed by the firm and by government agencies are essentially the same, but the interests of the two parties differ. Corresponding to the producers’ issue of ‘emission control’, consumers are concerned with emissions during the use phase and the associated health risks. These latter issues are translated by government into product standards and regulations for use. Besides these ‘transverse’ issues there are also ‘longitudinal’ issues, relating in principle to the supply chain as a whole. Although this second type of issue may be relevant for all stakeholder categories, here it is always the government that makes the first move. The issues of potential concern to producers and/or consumers are now pro-actively addressed by the decision-making authority


The issues of potential concern to producers and/or consumers are now pro-actively addressed by the decision-making authority. An important characteristic of the ‘longitudinal’ issues is their warning function. Given a product and its particular supply chain, the question now essentially addressed is where the main problems are located. These are the precise areas where (environmental) improvements are feasible and the next step, then, is to initiate specific programmes to implement such changes. In physical terms these changes will be identical to those arising directly from the ‘transverse’ frame of issues. This brief description does not break down these issues according to stakeholder interests; on this point the reader is referred to (Cowell et al., 1997). Here we assume that all the issues (stakeholderdependent) can be assigned to one of the indicated categories. Table B3 provides further examples (without being exhaustive). Part 3: Scientific background

Guinée et al., Handbook on LCA: Operational Guide to the ISO Standards (2002)


Table B3: Examples of ‘longitudinal’ and ‘transverse’ issues type of issue longitudinal product comparison issues product improvement reduced raw materials use process improvement waste strategies transverse issues emissions control local impacts process-integrated measures toxics control examples which product alternative is preferable? (e.g. packaging) underpinning of product policy eco-labeling new product design optimisation of environmental performance along the chain design of new product, process, function technological optimisation (e.g. which energy sources?) what combination of processing technology and recycling is best? how can a firm satisfy new operational standards? (e.g. stricter permit criteria) choice of new site, or extension of current operations (e.g. Schiphol Airport) how can a firm satisfy criteria to limit on-site environmental impacts? (e.g. environmental care programmes) how can products meet government and consumer health criteria? (e.g


Schiphol Airport) how can a firm satisfy criteria to limit on-site environmental impacts? (e.g. environmental care programmes) how can products meet government and consumer health criteria? (e.g. Cd in toys) The situation can be summarised as follows: Society as a whole can be conceived as consisting of a network of activities. For each activity and each chain of activities environmental criteria can be established. The first case involves specifically located objects, and the environmental issues arising relate to the activity and location in question. The level of aggregation at which the environmental issues can be addressed is the substance level. From the chain perspective, in contrast, it is the function of the chain that is the object of study, and the overall environmental burden accruing to that function is determined by the sum total of underlying activities


In this case the analysis aggregates at the ‘indicator’ level, highlighting the activities causing the greatest environmental burden. Actual developments to reduce the environmental burden take place at the level of individual activities. 3.4 Demarcating the scope of LCA In the previous section we described the main features of LCA, leading to a preferential area of application. A characteristic ‘buzzword’ for that area is ‘longitudinal’: whenever it is the supply chain that is the domain of study, LCA is an appropriate tool. Table B4 elaborates, with reference to keywords


A characteristic ‘buzzword’ for that area is ‘longitudinal’: whenever it is the supply chain that is the domain of study, LCA is an appropriate tool. Table B4 elaborates, with reference to keywords. Table B4: Applicability of LCA (keywords) stakeholder government industry consumers topic product policy prioritisation of ‘target-group policy’ general technological reconnaissance prioritisation of environmental technologies product comparison benchmarking (multi-criteria) product development process development product comparison / information In themselves, the keywords in the table are generic terms referring to entire categories. The idea is that they cover the whole field of ‘longitudinal’ issues, as expressed by the three stakeholders1


The idea is that they cover the whole field of ‘longitudinal’ issues, as expressed by the three stakeholders1. Some sources mention additional applications, for example OECD (1995), UNEP (1996) and Beck & Bosshart (1995): – for eco-labeling (in this study regarded as a type of product comparison); – for environmental audits (subsumed under ‘Environmental Management Systems’); – for negotiations (not a primary field of application, but a downstream link in the policy chain); – for product information (ditto). 1 Some literature sources mention NGOs as a separate stakeholder category. Although NGOs certainly play a specific role in the decision-making process, in the ‘issue’ phase that role can be considered embodied in the stakeholder ‘consumer’. Part 3 : Scientific background


4. New fields of LCA application LCA applications will always remain restricted to the domain referred to in Section 3 as that of the ‘longitudinal’ issues. This is indeed the strength of LCA in comparison with other tools. The analytical focus of many of the familiar applications of LCA has been on relatively simple and physically identifiable functions. The ‘longitudinal’ playing field is larger, though. New1 areas of application are formed by more complex functions, such as: – multifunctional systems; – collective functions (defence, infrastructure, etc.); – coherent clusters of functions (lifestyles). We now consider a number of examples from these new areas, providing suggestions for possible implementation. 4.1 Cascade systems A cascade is a good example of a multifunctional system. In a cascade system there is a substance flow that fulfils multiple functions consecutively. The principle is illustrated in Figure B3


In a cascade system there is a substance flow that fulfils multiple functions consecutively. The principle is illustrated in Figure B3. Following function 1, X is used as a raw material for function 2, and then for function 3, and so on. The question, now, is what environmental interventions associated with the substance flow are to be assigned to each of the functions. This is a form of the allocation problem that is commonly encountered. This terms of this problem have been described by Huppes & Schneider (1994) and Lindfors et al. (1995a). It has been clearly elaborated by Kortman et al. (1996), who distinguish between allocation to the upgrading step (from residual by-product to secondary material) and allocation of the interventions associated with primary extraction and production. The cascade problem boils down to the question of how the interventions associated with the processing of a particular substance flow are to be divided over the cascade of functions


The cascade problem boils down to the question of how the interventions associated with the processing of a particular substance flow are to be divided over the cascade of functions. In answering this question, criteria might be drawn up that relate to the degree of stability of the chain, in other words: to what extent are sales of the substance flow from function (j) guaranteed for the purpose of function (j+1)? This type of consideration accords with the basic principle of an economic supply chain. These insights can readily be applied in classical LCAs (i.e. for product comparison) involving bulk materials like paper, plastics and metals. Particularly for chains involving aluminium, the method is very sensitive and therefore requires a broad support base when it comes to the allocation method employed. For this particular material the cut-off method has little credibility (Ven, 1996). 1 New in the sense of familiar, recognised applications. Part 3: Scientific background


4.2 Lifestyle The economic activities of society are geared towards satisfying perceived needs. There are several main groups of functions: transport, shelter, food, clothing, leisure, protection, etc. The list is certainly not exhaustive. A characteristic feature of function delivery is that it generally involves a combination of a physical function and fulfilment of a specific need. Example: the function ‘shelter’ can be described in terms of protection against climate, disposal over living space, comfort, etc. In addition, though, the location, neighbourhood, scenery, region and so on all contribute to the overall notion of ‘shelter’, or ‘living function’. The combination of physical and non-physical satisfaction of needs is played out at the level of the individual. At that level ‘the function’ is beyond the capacities of LCA. Matters might be different if clusters of characteristics could be identified in predictable combinations, in terms of ‘lifestyle’, for instance


Matters might be different if clusters of characteristics could be identified in predictable combinations, in terms of ‘lifestyle’, for instance. The following lifestyles might then be distinguished: – childless, working couples; – the young, with their disco and ‘house’ culture; – young families; – senior citizens. The idea would then be to assign a distinctive ‘package’ of products to each of these lifestyle clusters. The functional unit could then be defined as ‘1 year of life of the reference group’. Table B5 shows a selection of product packages that might be used for this purpose. These are all products that are situated within the economic supply chain


Table B5 shows a selection of product packages that might be used for this purpose. These are all products that are situated within the economic supply chain. domain food and diet clothing shelter leisure activities mobility Table B5: Examples of products associated with lifestyles example confectionery, delicacies drinks meals restaurants fashion items living space furniture household appliances domestic help recreation holiday(s) clubbing car other vehicles It is no simple matter to incorporate ‘affective value’ in the functional unit or, in the case of a comparative LCA, to render the functional units ’equivalent’ in this respect. At any rate, the ‘affective function’ cannot be elaborated in a similar manner to the physical function. When developing a policy support tool it is better not to mix the two worlds and it is therefore recommended to restrict LCA to the physical function, using it as a tool to elucidate the environmental effects of the physical functional unit


This would allow for assessment of the overall environmental impact of a given lifestyle. Examples of combination functions in which this kind of analysis might play a part in government decision-making and in consumer information campaigns include: – clothing (e.g. use of various fabrics and dyes); – household management (e.g. appliances to replace manual activities); – food and diet (e.g. substitution of animal proteins); – leisure (e.g. different forms of leisure activity). 4.3 Infrastructure and transportation Physical planning is traditionally a controversial issue. In our present context we use the term as covering both the planning process as such, encompassing the combination of housing, work and transportation functions, and the planning of subsequent project implementation. Many disciplines currently contribute to the decision-making process, and the question is: what is the added value of LCA? Part 3 : Scientific background


This topic is similar to the ‘lifestyle’ issue, in the sense that here, too, there is an ‘affective’ element to how infrastructure is elaborated (e.g. urban planning and landscape architecture). In this case, though, the physical function is not entirely univalent. Besides housing and transport, other economic functions may also be involved in decision-making, such as employment. As an initial approach, the same procedure could be adopted as for ‘lifestyle’, i.e. a chain-type procedure for establishing the environmental impacts associated with delivery of a physical function (with the alternatives), with the results being used as a ‘mirror’ for assessing the other, non-physical functions. Disregarding for the moment how the affective element is to be elaborated in decision-making, in broad terms it can be stated that the physical function is an issue for which ‘transverse’ elaboration is eminently suitable. At best, assessment extends to direct, local impacts (EIA)


At best, assessment extends to direct, local impacts (EIA). It is not common for LCA to be employed in such cases. Examples of issues on which LCA might be able to shed new light include: – analysis of regional transportation systems (rail, metro, bus, car, bicycle, etc.), including infrastructure requirements1; – local and regional energy supply (heat and power production and distribution, including new technologies such as fuel cells); – urban water cycles (consequences of emission abatement measures); – optimisation of building and civil engineering structures in the urban environment2. If LCA is used for assessing infrastructure projects, appropriate system definition is crucial. One possible solution might be sought in defining the function as narrowly as possible, i.e. as construction of the ‘physical installation’ and maintaining it for a certain length of time


One possible solution might be sought in defining the function as narrowly as possible, i.e. as construction of the ‘physical installation’ and maintaining it for a certain length of time. Functions which in turn make use of the ‘installation’, for which it is thus a background process, can then be ignored. 4.4 Waste processing systems Waste processing is the final link in the production chain. The product has served its purpose and must now be disposed of. Obviously, the environmental burden associated with the disposal process must be allocated to the product. The question is where waste processing ends and where the natural environment starts, as is illustrated by the example of landfill. What this in fact means is that the end of the supply chain is not precisely defined. The chain ends with a quantity of residual waste, which can in time give rise to environmental emissions


What this in fact means is that the end of the supply chain is not precisely defined. The chain ends with a quantity of residual waste, which can in time give rise to environmental emissions. In current LCA practice thermal processing of waste (incineration, gasification, pyrolysis, digestion) is sometimes included in the chain. Several simple landfill models are also available. The conclusion is that although the supply chain can indeed be extended to include part of waste processing, there remains some quantity of ultimate waste with a potential environmental impact (Finnveden & Huppes, 1995; Udo de Haes & van Halen, 1997). National and regional governments are interested in establishing the preferred mode of waste processing for a given quality of supply, which may consist of a single (waste) product, several categories of product or an aggregated waste flow (AOO, 1995)


In the last case, it is not always relevant to allocate over the various input flows, provided a fixed input quality is assumed. In scenario studies in which the macrocomposition of the waste flow is subject to variation, due allowance should be made for the subsequent influence on emissions3. This requires a dynamic model (Rijpkema, 1996). Besides this issue of multifunctionality on the input side, waste processing also frequently involves multifunctionality on the output side, for not only is the function waste processing delivered, so too are co-products (electrical power and heat in the case of incineration, fuels in other thermal processes). This second type of multifunctionality must always be addressed. Both these multifunctionality problems are briefly examined in Annex 2


This second type of multifunctionality must always be addressed. Both these multifunctionality problems are briefly examined in Annex 2. Given the fact that waste processing is responsible for a substantial proportion of the environmental impacts associated with a large number of consumer products, product policy (both government and 1 There are indications that the alleged ‘environment-friendliness’ of rail transport compared with alternative modes of transport is based on a disregard of the environmental impacts associated with maintenance and infrastructure. 2 Studies point to an interesting trade-off between engineering features (insulation) and air conditioning requirements. 3 An example of an analysis topic might be: what is the influence of separate plastics waste collection (mixed plastics, or just PVC, say) on the environmental impact of a waste incinerator? Part 3: Scientific background


industry) would benefit enormously from improvement of both allocation methods, i.e. multifunctionality on the input and output side. However, a certain measure of decision support is already feasible with current LCA methods and is therefore desirable. Analysis can be focused on product improvement, based on the principal trouble spots in waste processing and on a comparison of processing methods for a given product1. In summary, it can be concluded that there are workable models for including waste processing in LCAs. This is relevant for the majority of products. If there are temporal issues associated with interventions and their resultant impacts (in the case of landfill, for example), LCA will be a less appropriate tool, however. In addition, allocation methodology must be further refined, bearing in mind the broad range of processes that must be addressed. LCA certainly has a role to play in supporting waste policy (national and EU) and is an appropriate tool for that purpose


LCA certainly has a role to play in supporting waste policy (national and EU) and is an appropriate tool for that purpose. It could, in principle, be used for further prioritisation of waste processing policy options, for example. 5. Conclusions and recommendations LCA is an instrument for assessing a given system: a product or a group of processes (a product being conceived of as a particular embodiment of a set of processes). The defining characteristic of such a system is that it addresses a particular demand in society; it fulfils a certain function. The system gains its coherence from the economic supply chain and an LCA accounts for every stage in the life cycle of the system. Actual assessment focuses on the system’s impacts on the environment. The chain of cause and effect underlying these environmental impacts is complex, and the assessment parameters employed in LCA are therefore merely indicators that stand for potential impacts. Many of them are socalled ‘stressors’, i.e


Many of them are socalled ‘stressors’, i.e. indicators referring to the start of the causal chain. Consequently, LCA is eminently suitable for addressing chain-oriented issues. The LCA methodology allows the impacts occurring at each link in a given supply chain to be aggregated, down to the level of relevant ‘sub-activities’. The outcome is, of necessity, an indication of the potential environmental impact of the product in question. LCA is less appropriate as a tool for assessing the environmental impacts associated with a specific locality (a specific ecological system). Neither is LCA the preferred instrument for evaluating systems in which the temporal aspect of the intervention-impact chain cannot be ignored. A third task for which LCA is inappropriate is assessment of systems in which the ‘function’ comprises a blend of physical and ‘affective’ aspects


A third task for which LCA is inappropriate is assessment of systems in which the ‘function’ comprises a blend of physical and ‘affective’ aspects. New applications of LCA are to be sought in the category of complex functions, such as: – multifunctional systems (including cascades); – collective functions (including infrastructure); – clusters of functions (including lifestyles). 1 An example here is the question whether it is better to incinerate hazardous waste in a dedicated facility (e.g. rotating furnace) or use it as a co-fuel in a cement kiln. Part 3 : Scientific background


Appendix C: Partitioning economic inputs and outputs to product systems1 Erwin Lindeijer (IVAM Environmental Research)2 Gjalt Huppes (CML) This appendix, drafted in 1999 as an interim result of the project, has in some respects been superseded by the (simpler) main text. As it goes into more detail on some points, however, it has been included here as an appendix. While the terminology has been aligned as far as possible with that of the main Guide, this is not true of all the positions adopted here. Currently employed at TNO-lndustrial Technology - Division of sustainable product development, Eindhoven. Part 3: Scientific background


1. Introduction: problem definition and the ISO partitioning procedure According to ISO standard 14040 (1997E), allocation is the partitioning of the economic and environmental inputs and/or outputs of a process to the product system under study. The problem of partitioning arises from the fact that in LCA we wish to break down the complexity of the economic system to analyse just one function (a product or service). This implies a need to draw boundaries around the analysed system and deal with the inputs and outputs of that system in a consistent manner. For this reason, defining system boundaries and performing allocation are allied problems. Also relevant to a discussion of partitioning are certain basic modeling choices. These are discussed in relevant chapters of the present Guide. One key modeling choice that has been made is for change-oriented LCA. If a different choice had been made, this would have led to different considerations and different results


One key modeling choice that has been made is for change-oriented LCA. If a different choice had been made, this would have led to different considerations and different results. Because of the close relationship between the definition of system boundaries and partitioning, we begin our discussion by reviewing the basic approaches to subdividing (economic) systems and presenting the ISO standard procedure for allocation, as this is the only standardised procedure currently available. The multiple economic inputs and outputs and environmental interventions associated with any given product system are always based on one or more multifunctional processes within the system. It is around these processes that the discussion on partitioning revolves. There are three basic types of multifunctional processes that require partitioning (Figure C1): multi-output processes, multi-input processes and input-output processes which cross system boundaries


There are three basic types of multifunctional processes that require partitioning (Figure C1): multi-output processes, multi-input processes and input-output processes which cross system boundaries. Although ISO 14041 (1998E) provides a basic stepwise procedure for addressing these processes which specifies preferred methods for dealing with economic system boundaries, it does not go into specific details. This allows for different interpretations and means that the procedure cannot be consistently and unambiguously applied. Nonetheless, it is an agreed framework to which we adhere in this Appendix, but which we shall interpret in two distinct ways. The text of the ISO procedure is reproduced below (the word ‘cannot’ in various phrases should be interpreted in the sense of ‘is not preferred for good reasons’). Part 3 : Scientific background


ISO allocation procedure (ISO 14041, 1998E; Clause 6.5.3) Step 1: Wherever possible, allocation should be avoided by: dividing the unit process to be allocated into two or more subprocesses and collecting the input and output data related to these subprocesses; expanding the product system to include the additional functions related to the co-products, taking into account the requirements of 5.3.2. (Function, functional unit, alternatives and reference flows) Step 2: Where allocation cannot be avoided, the inputs and outputs of the system should be partitioned between its different products or functions in a way which reflects the underlying physical relationships between them; i.e. they shall reflect the way in which the inputs and outputs are changed by quantitative changes in the products or functions delivered by the system. The resulting allocation will not necessarily be in proportion to any simple measurement such as the mass or molar flows of co-products


The resulting allocation will not necessarily be in proportion to any simple measurement such as the mass or molar flows of co-products. Step 3: Where physical relationship alone cannot be established or used as the basis for allocation, the inputs should be allocated between the products and functions in a way which reflects other relationships between them. For example, input and output data might be allocated between coproducts in proportion to the economic value of the products. ISO 14041 also provides a number of general criteria and constraints on the partitioning of inputs and outputs that are of relevance to any further elaboration of partitioning methods. These principles are summarised below. Where adherence is obligatory for performing an LCA according to ISO standards, this is indicated in bold typeface. For purposes of consistency, some statements have been slightly paraphrased in line with the terminology employed in this guide


For purposes of consistency, some statements have been slightly paraphrased in line with the terminology employed in this guide. 1) The sum of the inputs and the sum of the outputs of the allocated subsystems shall equal the inputs and outputs of the unallocated system, respectively (100% rule). 2) Whenever several alternative allocation methods seem applicable, a sensitivity analysis shall be conducted to illustrate the consequences of the departure from the selected method. 3) There shall be uniform application of allocation methods to similar inputs and outputs of the system for open-loop allocation: recycled material entering the product system should be treated in the same manner as similar material leaving the system 4) When changes occur in the inherent properties of materials during subsequent uses, these changes shall be taken into account in the calculation


5) When there are no changes in the inherent properties of the recycled material, use of that material displaces the use of virgin materials, and allocation is avoided by treating the product system as a closed loop. 6) In the case of open-loop recycling allocation there are several possible allocation parameters: physical properties economic value the number of subsequent uses of the recycled material. These can be considered as the ISO requirements for dealing with the partitioning of system inputs and outputs among product systems. In the next section we examine several specific approaches to partitioning, following the ISO allocation procedure and thereby explaining how system boundaries are to be drawn. Section 3 is devoted mainly to step 1.2 of the ISO procedure (expanding system boundaries, or substitution). Step 1.1 (division into subprocesses) should be dealt with as part of inventory modeling and is here mentioned only briefly


Step 1.1 (division into subprocesses) should be dealt with as part of inventory modeling and is here mentioned only briefly. Section 4 discusses ISO step 2 (allocation based on physical relationships), pointing out the close relationship with step 1.1, reflected in the examples given by ISO to illustrate this step. Section 5 discusses economic allocation, the main example of step 3 of the ISO procedure. Allocation in proportion to mass, in certain applications a suitable proxy for allocation based on economic value, is also briefly discussed. In the final section of this appendix more precise criteria are elaborated and guidelines provided for applying each step of the ISO procedure, with the aim of reducing its ambiguity and achieving more consistent usage. In particular, two main interpretations of the ISO procedure are provided. Part 3: Scientific background ). (


2. Basic approaches to allocation and the question of system boundaries This section, based on a literature survey, discusses the principal partitioning methods currently in use for the three types of multifunctional process illustrated in Figure C1, indicating their respective ranges of application and their relationship to the steps of the ISO procedure and examining their implications for redefining system boundaries (see Section 1). From this discussion a number of basic approaches are distilled, which are discussed in subsequent sections. MULTI-INPUT PROCESSES The main type of multi-input process in which partitioning is required is waste disposal, e.g. landfilling, incineration or composting. This complex subject has been addressed in a comprehensive Dutch project (Udo de Haes & van Halen (eds), 1997) as well as in a number of specific methodological studies (e.g. Eggels & van der Ven, 1995; Finnveden, 1996c; Bez et al., 1998; Nielsen & Hauschild, 1998)


Eggels & van der Ven, 1995; Finnveden, 1996c; Bez et al., 1998; Nielsen & Hauschild, 1998). In all these studies, close examination and modeling of the respective disposal routes allowed allocation to be avoided by division into subprocesses, or allocation to be based on physical relationships (e.g. chemical properties) for all the components of the input waste streams (step 2 of the ISO procedure). If the electrical output of an incineration plant is allocated to the various inputs according to their heating value, this can also be considered as application of ISO step 2. After allocation of the electrical output, there still remain input-output allocation problems, however: metallic outputs with an economic value, for example1. Dealing with the multi-input part of such processes is a highly technical, process-specific issue and the reader is referred to the literature. The input-output component will be considered in more detail below


The input-output component will be considered in more detail below. Transportation of packaged goods (the example of 7.3.1. in ISO TR 14049 (1998) for step 2 of the ISO 14041 procedure) is also a multi-input process, leading to a similar process-specific solution: partitioning the load-dependent part of the burdens depending on load weight or volume2. Again, the reader is referred to the literature (FhG et al., 1991). In this case no input-output allocation problem remains, as the process is part of the main product life cycle. Inputs are generally followed upstream to the ultimate raw material inputs from the environment system, or to their source in other product systems, as secondary materials. In our present context it is this issue of secondary materials input that is important, for these are to be partitioned in the same way as similar secondary materials leaving the system (see criterion 4 in Section 1, above)


The present discussion of partitioning approaches already rejects out of hand any method not satisfying this criterion. In examining each of the allocation methods below, we shall specifically indicate how these inputs should be dealt with. MULTI-OUTPUT PROCESSES Many approaches have been proposed and discussed for partitioning multi-output processes (e.g. Huppes, 1993; Udo de Haes et al., 1996; Heijungs, 1997a; Klöppfer, 1996, Frischknecht, 1998; Weidema et al., 1999). The majority of these methods avoid allocation by system expansion (step 1.2 of ISO 14041) or allocate flows on the basis of non-physical relationships (ISO step 3). The only multi-output example found for ISO step 2 (in the ‘Eco-labeling’ report, Udo de Haes et al., 1996) seems to be more exemplary of ISO step 1.1 (see Section 4). Here, our focus is on approaches according to ISO steps 1.2 and 3, especially those dealing with recycling


Here, our focus is on approaches according to ISO steps 1.2 and 3, especially those dealing with recycling. * Step 1.2 of ISO 14041 applied to multi-output processes There are a variety of practical options for avoiding allocation by system expansion (step 1.2 of the ISO procedure). Classical system expansion Direct avoidance of allocation in the true spirit of ISO step 1.2 proceeds by expanding the system boundaries to include all the additional functions resulting from multifunctional processes in the system. After the process has been subdivided up into discrete components per input, many input-output processes will remain. These will sometimes be multi-output processes (burning a hammer with a wooden handle, for example, producing iron and electricity), but at this detailed level of modeling the various outputs can be allocated to components of the input, with some simplifying assumptions. Consequently, input-output allocation should ultimately treat each component separately


Consequently, input-output allocation should ultimately treat each component separately. 2 In this example the process ‘transport’ can be subdivided into transport of commodities and of packaging, permitting independent variation of inputs within the constraints of maximum loading weight and volume. This means that step 1.1 of the ISO procedure is in fact used for analysing the system. Part 3 : Scientific background


As this involves introduction of a new, more broadly defined functional unit, however, it alters the very goal and scope of the LCA study. This is not generally an option for all multifunctional processes, for it implies an extension of the analysis to the whole world, as each expansion itself involves multifunctional processes. This approach may be feasible for major functional outputs only. To render ‘equivalent’ the systems being compared, to all alternatives not having the same additional function a system is then added that provides just this additional function. To avoid the multiple functional unit, the additional system is then subtracted from all alternatives. This subtraction of the additional function system can be interpreted as substitution. For example, the electrical power co-produced in waste incineration substitutes primary power production and can be subtracted from the multifunctional system to render it monofunctional


For example, the electrical power co-produced in waste incineration substitutes primary power production and can be subtracted from the multifunctional system to render it monofunctional. A special case of system expansion involves extension to an entire product group in a given region, as has been done for European wood fibre products (Ekvall et al., 1997), for example. In this case detailed models of subsystems are interlinked according to the annual material flows within the market in the region concerned. The same principle has also been adopted for a database on corrugated cardboard (FEFCO, 1997), although in this case there is less detailed analysis within the system. In all these cases, the need for allocation is restricted to the (extended) system boundaries. On the implicit assumption that the net material inflows and outflows are of only negligible (economic) value compared with the flows within the system, a cut-off is introduced


On the implicit assumption that the net material inflows and outflows are of only negligible (economic) value compared with the flows within the system, a cut-off is introduced. Multiple outputs of less important processes are dealt with through cut-off or quasi-closed-loop (sometimes termed semi-closed loop) procedures (see below), where flows actually going to other product systems are assumed to be used in the product system studied. Actual inputs are then treated as being substituted by the semi-closed loop flows. In these examples the goal and scope of the studies allowed for a ‘rough and ready’ cut-off, to be subsequently validated in a sensitivity analysis. It should also be stressed that in such cases it is no longer possible to analyse individual products within the product group of interest, unless allocation or substitution is performed at that level. System expansion and substitution The system expansion concept can also be applied to recycling


System expansion and substitution The system expansion concept can also be applied to recycling. The reasoning often applied is that this is theoretically equivalent to performing a comparison between a function system (1) delivering two functions x and y and two other systems (function systems 2 and 3) each delivering only one of the functions (see Figure C2 below). By subtracting the single function system 3 from the multifunctional system 1, this combined system is reduced to a system performing just one function. This reasoning can be simplified by saying that the secondary output y of function system 1 replaces the primary production process PROD B of function system 3. This popular line of thinking forms the basis for the so-called ‘substitution, or avoided burden method’. This method makes several implicit assumptions: on how material production for function system 3 is being replaced, on the absence of new market demand arising through substitution (i.e


This method makes several implicit assumptions: on how material production for function system 3 is being replaced, on the absence of new market demand arising through substitution (i.e. substitution occurs only within existing markets) and on the feasibility of other multiple outputs within function system 3 being able to be dealt with in a similar fashion. It is not always obvious which additional function should be subtracted. In everyday LCA practice a database is often used in which processes are already allocated, but this is merely a pragmatic choice with no general theoretical underpinning1, as this begs the question of how the multifunctionality problem should be solved. Nevertheless, this is a generally accepted approach to substitution using monofunctional databases. A special case of substitution occurs when the same type of material is substituted, but is not necessarily recovered in the same production system


A special case of substitution occurs when the same type of material is substituted, but is not necessarily recovered in the same production system. An example is the reuse of polycarbonate from milk bottles in vehicle windscreens. According to ISO Technical Report 14049 (1998; clause 8.3.2) a so-called (semi-) ‘closed-loop procedure’ can be used to model this situation in which material quality remains the same, essentially using the avoided burden approach for the amount of material recovered above the amount entering the system via the general market mix. ISO states as an additional requirement that the same primary and secondary production processes must be used at both the product and the (national) market level. However, this approach can also be used to model quality losses in a cascaded system. Care must be taken to closely analyse the absolute and relative amounts of material circulating in such a system


However, this approach can also be used to model quality losses in a cascaded system. Care must be taken to closely analyse the absolute and relative amounts of material circulating in such a system. In fact, the product system studied is a subsystem of the total primary and secondary market system, resulting in a need to allocate (for instance) a net export of secondary material from the specific product system to the (possibly regional) market system, taking into account the attendant quality loss. The procedure for dealing with such subsystems is elaborated in Section 3, below. 1 Frischknecht (1998, p. 119) states that the avoided burden method may also be used in descriptive LCAs, but that the choice of alternative technology is then entirely arbitrary. Part 3: Scientific background


The ‘50–50 method’ advocated as a default in the Nordic LCA guidelines (Lindfors et al., 1995a) also implicitly assumes return of material of the same quality to the same system, or at least something equivalent. Fifty per cent of the production, waste disposal and upgrading processes is allocated to the product system under study according to the proportion of primary or secondary input. This approach is a compromise between rewarding use of secondary material and rewarding supply of recyclable material. The 100% rule is violated here as the 50% rule cannot be symmetrically applied to the connected systems, because primary production is also being halved, compared to the actual amount. This is a rough and ready method for dealing with systems as parts of larger market systems


This is a rough and ready method for dealing with systems as parts of larger market systems. A related but more elaborate line of economic reasoning for applying the substitution concept is that the delivering system really will substitute other systems that might deliver the additional function, instead of theoretically comparing and substituting systems. This implies building a scenario for each future substitution, based on market expectations. Seen in this way, in Figure C2 there is assumed to be an actual market shift in the future, with process UPGR replacing process PROD B, which hence can be subtracted, interpreted as substitution. This reasoning is more consistently in line with the changeoriented LCA framework. A procedure for dealing with such situations (as well as with other multifunctional processes) is given by Weidema et al. (1999), who explicitly state that it is valid for change-oriented LCAs only


A procedure for dealing with such situations (as well as with other multifunctional processes) is given by Weidema et al. (1999), who explicitly state that it is valid for change-oriented LCAs only. These authors examine which processes will be substituted as a result of volume adjustments and which will not. Those processes characterised by volume adjustment (in economic terms, those with a high elasticity of supply) are the marginal processes. This approach is discussed below in Section 3. Part 3 : Scientific background


Cascade approaches Frequently there is a cascade of lower quality applications, as is the case when white paper is recycled into journals and journals into cardboard. In such cases where the quality of secondary material does not remain constant, the closed-loop procedure cannot be applied in the same way. Neither can the substitution method be directly applied if there are no processes substituted by the different material quality, as is the case, for example, in low-quality, secondary use of mixed plastics. Such low-grade plastics are simply not produced in a primary production process and hence there is no substituting process. Either the lower-quality material is incorporated in a general model analysing only an average material quality (as in the market-level, closed-loop model; see above) or the quality loss must be taken into account by reckoning with the quality loss occurring in each cycle (the cascade approach). The latter approach can be seen as a form of ’system expansion’


The latter approach can be seen as a form of ’system expansion’. Clause 8.3.3 of ISO TR 14049 (1998) gives an example of the cascading approach for kraft bleached paperboard being recycled to tissues, with no further recycling, and to other products, which may be further recycled. Accounting for quality loss may partly be achieved by taking into account the material losses occurring in each cycle1. However, the method applies an inappropriate mathematical formula (assuming infinite recycling, although paper fibre cycles are limited in number). Using the method without the simplified formula may be feasible, but is probably tedious and has not been encountered in the literature. Other examples of the cascading approach are the so-called ‘quality method’ (Lindeijer, 1994 and Kortman et al., 1996) and the ‘estafette method’ (Seijdel, 1994). The most elaborate method in this category is that of Schneider (1996), which analyses the complete cascade in full detail


The most elaborate method in this category is that of Schneider (1996), which analyses the complete cascade in full detail. In the quality method, the primary production is divided among all the cycles according to the relative quality loss per cycle, and the losses in volume (or mass) in each cycle, as waste. The waste disposed of in each cycle includes the discarded lower quality material. The upgrading process is allocated to the receiving system, by convention, although allocation based on a consistent choice of system boundaries is preferred. In the estafette method each cycle is considered to substitute a different primary material (according to its quality), effectively applying the substitution approach to each cycle. In this method, however, final waste disposal is also divided over the entire cascade according to the functional losses occurring at each step, requiring quantification of these relative losses


In this method, however, final waste disposal is also divided over the entire cascade according to the functional losses occurring at each step, requiring quantification of these relative losses. The upgrading process is necessary for delivering a certain quality output and is thus allocated to the delivering (or receiving) system. The method can be applied only to systems in which there is a primary process that can be appropriately substituted. Note that there is no substitution of primary materials in either of the examples. Thus, recycling scores worse environmentally than if full substitution were assumed. All these methods require more or less detailed knowledge of (at least) the number of cycles and the quality and volume reduction occurring in each. All cascading approaches face the problem of major uncertainties regarding the quality arising in each cycle, making it generally hard to decide which burdens should be allocated to which material quality pool


In the TR 14049 example on bleached kraft paper and in the simplified quality method applied in (Kortman et al., 1996) the lower-quality systems cannot even be distinguished from one another. Applying these methods consistently in databases is therefore problematic. Even using them in such a way as to distinguish between individual product systems seems contrary to the fact that the whole cascade is considered and still requires allocation of the intermediate input-output process (see below). Given these detailed problems, current cascading approaches are not considered adequate as basic solutions to the multifunctionality problem and may only be applied as non-default approaches in a sensitivity analysis. * Step 3 of ISO 14041 applied to multi-output processes Recycling can be modeled as a multi-output process if the material retains a positive economic value throughout the system


* Step 3 of ISO 14041 applied to multi-output processes Recycling can be modeled as a multi-output process if the material retains a positive economic value throughout the system. There are then at least two functional outputs: the functional unit in the use phase and the discarded material resulting from that use2. On this line of reasoning, all multifunctional processes, including recycling, can be dealt with in the same consistent fashion. However, this requires that relative economic, i.e. market value be used as an allocation parameter, as physical parameters cannot be used for the functional output of the system. If economic value is taken as the decisive criterion for defining system boundaries, this is also the most obvious allocation parameter. (It is, of course, an 1 The associated waste disposal should also be taken into account. This is not mentioned in ISO TR 14049


(It is, of course, an 1 The associated waste disposal should also be taken into account. This is not mentioned in ISO TR 14049. 2 It is arguable whether the functional use is actually an economic output: no one pays consumers for consuming products the way producers are paid for their economic output. Not regarding the functional output as an economic process would change the situation from multi-output allocation at the use process stage to input-output allocation at the upgrading process stage (see below). Which line of reasoning is followed is crucial. In section 5 the starting point is that the functional use is an economic output. Part 3: Scientific background


important reason for the processes occurring at all1.) This form of ‘economic allocation’ can be applied equally to input-output processes and multi-output processes. It will now be discussed briefly in relation to the former and explained in more detail in Section 5. INPUT-OUTPUT PROCESSES * Step 1.2 of ISO 14041 applied to input-output processes Step 1.2 of the ISO procedure can be applied to input-output processes, particularly in the form of the avoided burden and marginal substitution methods. The system is thereby expanded to enable subtraction of the substituted production process. As mentioned earlier, the marginal substitution method requires scenario-building and, for fair comparison in comparative LCAs, also assumptions regarding the future development of markets. System expansion to encompass the full market of a coproduct (e.g


System expansion to encompass the full market of a coproduct (e.g. all electricity production) does not solve input-output allocation problems at the extended system boundaries; it somehow applies a cut-off method (see below) as a final resort, as do the other substitution approaches. Step 3 of ISO 14041 applied to input-output processes The position of the system boundary depends on the economic value of the flows leaving the processes of interest. Given a chain of processes in which discarded products from use process USE A (delivering function x) are upgraded in UPGR, which subsequently supplies use process USE C (delivering function y) five cases can be distinguished (Figure C3). If the value of the outflow of USE A is positive and paid for by UPGR, USE A is to be allocated at least partly to USE C, and UPGR entirely


If the value of the outflow of USE A is positive and paid for by UPGR, USE A is to be allocated at least partly to USE C, and UPGR entirely. The system boundary is then to be drawn in position 1, indicating that some fraction of USE A is to be regarded as a production process for the secondary material in USE C. If the discarded products from USE A have zero value, the system boundary (no. 2) is drawn between USE A and UPGR. If the discarded products have a negative value and the outflow of UPGR positive, the boundary (no. 3) is drawn in UPGR, which fulfils a waste management function with respect to function x. If after upgrading the value is zero, the boundary (no. 4) is drawn between UPGR and the downstream system, USE C. If the value is still negative even after upgrading, UPGR is to be allocated entirely to USE A, as is part of USE C, which fulfils a waste management function for it. System boundary no. 5 then pertains


System boundary no. 5 then pertains. Now, how can ISO step 3 be applied? This is necessary only for system boundaries 1, 3 and 5. The simplest solution then is to treat 1 as 2, and 3 as 4. In the first case the upgrading from negative (or zero) to positive economic value is considered part of the downstream system, USE C. This is called the ‘cutoff method’ for allocation and can be considered a rough estimate for dealing with input-output processes at the system boundaries (i.e. when no reliable data is available on the economic value prior to upgrading). In the 1992 CML guide (Heijungs et al., 1992) this approach was proposed as a simple, but unsatisfactory, general method for dealing with allocation. The commonest situation in recycling is one in which a negatively valued discarded product, such as a waste (disposal of which must be paid for) is upgraded to a positively valued product


The commonest situation in recycling is one in which a negatively valued discarded product, such as a waste (disposal of which must be paid for) is upgraded to a positively valued product. Here both the costs and the environmental burdens associated with upgrading are borne by the receiving as well the delivering system. The process where the value switches from negative to positive is considered an input-output process that traverses the system boundaries. The environmental burdens of that process are then to be allocated partly to the delivering system and partly to the receiving system. In the 50–50 method discussed above (Lindfors et al., 1995a) 50% of the upgrading process is allocated to the delivering system and 50% to the receiving system. A more sophisticated method, however, is to allocate according to the shares in total proceeds of the process


A more sophisticated method, however, is to allocate according to the shares in total proceeds of the process. Similar to the situation with boundary 1 is that in which the economic value of the material in the discarded product remains negative even after upgrading. This implies that the receiving system is providing the delivering system with a form of waste management service. Some of the burdens of the receiving process should therefore be partitioned to the delivering system, in as far as these burdens have not been separated off under step 1.1 of the ISO procedure. The upgrading process is then part of the delivering system. In some cases the market price may not be the most appropriate allocation parameter, especially if the market is not fully developed. This is often the case for new recycling initiatives and an alternative parameter must then as a proxy. Part 3 : Scientific background


Economic allocation A generally applicable method for all system boundary situations concerned is economic allocation, whereby the various functional flows are allocated according to their share in the total proceeds of the process. This method is also applicable to the other types of multifunctional processes. Conclusion The problem of partitioning is a complex one and many solutions have been proposed. We have endeavoured to structure the discussion by distinguishing between various types of process, related to different system boundary problems, and following the steps of the ISO allocation procedure, in the context of change-oriented LCAs. As has been illustrated, the partitioning approach is closely linked to the delineation of boundaries around the product system(s), and most approaches apply specific criteria for doing so. The goal and scope of the study are also important here, as system expansion means a redefinition of the functional unit


The goal and scope of the study are also important here, as system expansion means a redefinition of the functional unit. Two basic approaches can be distinguished: 1) avoiding allocation by expanding the system boundaries (ISO step 1.2, by generalising the product system(s) under study to be of a certain average material quality and applying a closed-loop allocation procedure, or by analysing the system marginally substituted by the recycled material and subtracting it) 2) allocation at the system boundaries at a process level (ISO step 3), here based on economic considerations, i.e. market value or imputed market value. The marginal substitution method always draws the system boundaries around processes, while the economic allocation method generally draws them within processes. Neither method takes cascading effects into account. The two approaches are discussed more extensively in Sections 3 and 5, respectively


Neither method takes cascading effects into account. The two approaches are discussed more extensively in Sections 3 and 5, respectively. Allocation on the basis of physical relationships between outputs (ISO step 2) is deemed feasible only if the relative magnitude of outputs can be changed, i.e. if it is a combined process, rather than a joint process in which relative outputs cannot be varied. This situation is examined in Section 4. Part 3: Scientific background


3. Avoiding allocation (step 1.2 of ISO 14041) RULES FOR SYSTEM EXPANSION If sensitivity analysis shows that flows across system boundaries and stocks are negligible, cut-offs may be introduced. If this is not the case these flows must be taken into consideration, however. The simplest mode of system expansion is then to use a broader functional unit, i.e. expand the system being assessed. It should be checked whether substitution leads to serious nested-system boundary problems, as the systems added in expansion will themselves usually be multifunctional systems. For example, electricity co-produces heat and, more generally, most well-developed processes are multifunctional. In most cases, therefore, it is to be expected that allocation by step 3 should be applied. If substitution is possible, certain rules apply. RULES FOR SUBSTITUTION System expansion can be applied at a single product system level by the ‘substitution, or avoided burden method’


If substitution is possible, certain rules apply. RULES FOR SUBSTITUTION System expansion can be applied at a single product system level by the ‘substitution, or avoided burden method’. The material substituted should have the same quality as the recovered material (the burdens arising in achieving that quality, e.g. in an upgrading process, should therefore be included in the system delivering the recovered material). This approach should only be applied in cases where it is entirely clear which material is (to be) substituted. As this will never be clear without a market study, this approach is very coarse and a sensitivity analysis should therefore be performed to indicate the difference in results if different substitution is assumed or some allocation method is applied


(Sensitivity analysis should of course be undertaken, as appropriate throughout every LCA.) Furthermore, when PROD B in Figure C2 (situation 2b) is avoided in a functional unit (say 1 kg) of PROD A, only a fraction of the market for PROD B is replaced by PROD A. This fraction should then be incorporated in the modeling of PROD B. When comparing a system with incineration to a similar system with materials recycling, for example, it is not only the substitution of materials that needs to be addressed but also the reduction of electrical output due to less incineration, leading to additional electricity production elsewhere. Caution is thus in order when using data on unit processes from databases in which the substitution method has been applied, as the process adjustments on the input side may not have been calculated according to product-specific changes in outputs


Appropriate calculations should then be made to correct these adjustments throughout the database, to ensure that system imprecision does not lead to major fuzziness of the LCA results. In fact, we do not recommend the avoided burden method as a baseline approach, because of its indeterminate implications for the consistency of system modeling. Simplifying the system by adopting a (semi-) ‘closed-loop procedure’ is equivalent to an avoided burden method in which the material quality remains the same. As substitution is simplified here and no marginal impacts are to be anticipated, this is a valid approach when the inherent properties remain the same, in accordance with ISO 14041 (1998E). If material quality is reduced relative to average material quality in the marketplace, allocation should be on the basis of this quality difference


If material quality is reduced relative to average material quality in the marketplace, allocation should be on the basis of this quality difference. One way to correct for lower quality is to subtract only a fraction of the primary material substituted, according to the ratio between the value of the primary material and the degraded secondary material. Weidema et al. (1999) have outlined a procedure for selecting which processes are to be deemed marginal processes, i.e. which processes will be affected by a particular change and therefore substituted in the market. As the figure explaining this ‘symmetrical substitution’ procedure could not be reproduced here, a text summary is provided. See also the example by Weidema in the main text of Part 2b


As the figure explaining this ‘symmetrical substitution’ procedure could not be reproduced here, a text summary is provided. See also the example by Weidema in the main text of Part 2b. The procedure consists of five steps and seeks essentially to answer two questions: 1) What is the situation in which the studied change in demand occurs? 2) In this situation, which specific technology is affected by the change? which are addressed, respectively, in steps a to c and d and e: a) What is the time horizon of the study? This guide deals with long-term changes only1. b) Does the change affect specific processes only or an entire market? If only specific processes: these are the marginal processes. If a market is affected, proceed to step c. c) What is the volume trend in the affected market: upward or downward1, that is are only old installations discarded or are also new installations installed? List possible technologies and make a choice


1 Short-term marginal effects may be identified using a similar decision tree as the one presented here. The difference between the two diagrams would be that instead of increases and decreases in capacity, the short-term diagram would show increases and decreases in capacity use, within existing capacity. Part 3 : Scientific background


d) Is production capacity anticipated to expand or shrink? If neither is the case, this technology is not a marginal technology; return to the list. If yes, proceed to step e. e) Is this technology the most preferred (if being installed) or the least preferred (if being decommissioned)2? If it is neither, this is not a marginal technology; return to the top of the list. If yes, this is the marginal technology. Although developed for selecting marginal technologies for general application in comparative LCA studies, this procedure can also be used for selecting the processes to be substituted in system expansion (Weidema, 1998a), as for the case of recycling. Asked for an example of application of this procedure to recycling, Weidema provided the following illustration: EXAMPLE: STONE DEMOLITION WASTE WORKED INTO CONCRETE FILLER The main output of the primary process is the service ‘demolition’


The waste flow (or co-product; it does not matter, as will be seen from the following) is ‘stone’. This then undergoes one or more recycling processes (‘transport, crushing, washing, sorting’), before being fed as raw materials into a secondary process: ‘concrete filler production’. How, now, should allocation of this recycling process proceed? This can be decided by asking one simple question. If it is the secondary product that is the focus of the study, the question is ‘Does an increase in demand for the secondary product (‘concrete filler’) lead to an equivalent increase in recycling?’ If the answer is yes, recycling is the marginal production process for the secondary-process raw material in question, and the recycling process should be ‘allocated’ to, i.e. included in the product system of, the secondary product. If the answer is no, recycling is determined by external forces (from the perspective of the secondary product system), e.g


included in the product system of, the secondary product. If the answer is no, recycling is determined by external forces (from the perspective of the secondary product system), e.g. by legislation or because recycling is cheaper than waste treatment, and the recycling process should be excluded from the secondary system (and ‘allocated’ to the primary process). If it is the primary product that is under study, a parallel question is asked: ‘Does an increase in demand for the primary product (i.e. ‘demolition’) lead to an equivalent increase in recycling?’ If the answer is yes, recycling is the marginal waste-handling process for the primary system, and is to be included there. If the answer is no, recycling is determined by external forces (e.g. demand for recycled products) and is not to be included in the primary product system. As can be seen, these two questions are entirely complementary and lead to the same division between the two systems


As can be seen, these two questions are entirely complementary and lead to the same division between the two systems. Since we typically study only one of the two systems (the reason why an ‘allocation problem’ arose in the first place) we can amalgamate the two questions into one: ‘Does an increase in demand for the product under study lead to a corresponding increase in the material turnover of the recycling process?’ If yes, include the recycling process, if not exclude it. It should be noted that this procedure is independent of the price of the waste, i.e. it works whether the waste stone has a negative or positive economic value. It should also be noted that the word ‘increase’ can be replaced by ‘decrease’ throughout, with no change of result as long as we are dealing with small (marginal) changes. This example addresses upgrading processes only


This example addresses upgrading processes only. According to the general reasoning underlying system expansion (Weidema, 1998a), if the delivering system is to include the upgrading process because an increase in its output fosters recycling, it should also be the one to which the avoided burdens of the substituted system should be allocated3. The same should also apply on the input side: if increased demand for secondary material increases output thereof, the avoidance of primary material should be accounted for (as has generally already been done in systems modeling). Finally, in a change1 To be precise, the option ‘upward’ is relevant only if market volume is declining faster than the decline resulting from regular, planned phase-out of capital goods. Consequently, the option ‘downward’ is also valid when market volume is decreasing slower than the regular capital replacement rate


Consequently, the option ‘downward’ is also valid when market volume is decreasing slower than the regular capital replacement rate. 2 The preference implied here relates to the expected long-term production costs taking into account all externalities relevant for the one who decides about the capacity adjustment. See the text on step e) for further elaboration of this point. 3 If other co-products arise in the substituted flow diagram, the same procedure should be followed. If gravel extraction is being substituted by production of concrete debris, the question is whether the co-production of sand is also affected by substitution. If so, it should be included; if not, not. A sensitivity analysis should be performed to ascertain how far this procedure should be followed, but more than three levels will be rare. Part 3: Scientific background


oriented LCA in which a steady-state model is used to compare ‘business-as-usual’ (e.g. building roads on sand) with a new situation (e.g. using demolition waste), market trends, both upward and downward, should be included in both cases. In principle, the above procedure can also be adopted for non-marginal approaches (Weidema, 1998a). The modeling of the system should then be adjusted appropriately, however. For long-term non-marginal changes this means that future scenarios and technologies should be applied. DRAWBACKS OF THE SUBSTITUTION APPROACH Although this approach is the first preference in ISO 14041, several drawbacks should be mentioned: – Classical system expansion can only be applied if the functional unit (and possibly goal) of the study is changed. – In the case of marginal substitution, it is necessary to compare the situation with marginal (future) adjustments with the future situation without such adjustments


– In the case of marginal substitution, it is necessary to compare the situation with marginal (future) adjustments with the future situation without such adjustments. However, it is unclear how large an error will be introduced by comparing two future market scenarios calculated using current databases, in which the avoided burden method is generally applied. – In the case of recycling, no operational procedure has yet been developed for selecting marginal technologies. What if supply of a secondary material follows demand, but not to an ‘equivalent’ (i.e. equal) extent? As substitution is then only partial, should only part of the process be subtracted? If so, it will be difficult to determine the appropriate extent. – In the real world, supply and demand are to some degree elastic (i.e. volume varies in response to price), with complete elasticity or inelasticity extremely unusual


– In the real world, supply and demand are to some degree elastic (i.e. volume varies in response to price), with complete elasticity or inelasticity extremely unusual. Both the general substitution method and Weidema’s symmetric substitution method address these exceptions, rather than the general case. – In subtracting a substituted alternative, there is a fair chance that the subtracted system will be a multifunctional one itself, leading to nested loops of subtraction. Arbitrariness may be introduced if a cut-off approach is applied after the first nesting. – In the case of emergent markets, substitution may be ambiguous. It can be argued that demand for a new product made from recovered material will emerge regardless, and that in supplying for that demand equivalent primary production is thus being substituted, so that the first use of the material should be rewarded


It can also be argued, however, that such secondary demand will not necessarily emerge, in which case recycling should not be rewarded, as consumption of the product made from the recovered material becomes essentially a waste disposal phase, to be allocated to the first use of the material. The merits of the two positions are hard to judge in the abstract. However, this problem is relevant for all approaches for dealing with partitioning new material applications at system boundaries. 4. Allocation according to physical relationships (step 2 of ISO 14041) To indicate how step 2 of the allocation procedure in ISO 14041 (1998E) is to be elaborated, let us consider some of the examples provided in ISO TR 14049 (1998). Partitioning according to physical relationships among outputs (products) is exemplified in ISO TR 14049 by the combined transportation of packaging and goods, where only the packaging is analysed


Partitioning according to physical relationships among outputs (products) is exemplified in ISO TR 14049 by the combined transportation of packaging and goods, where only the packaging is analysed. Here purely physical parameters are used to allocate the energy consumed between goods and packaging: mass and volume. In this case the ratio between the various environmental parameters ({Di} in ISO TR 14049, clause 7.3.3) can be kept constant while varying the relative weight or volume of the outputs. The possibility of varying the relative outputs while keeping {Di} constant is stated as the sole argument for performing step 2 of the ISO 14041 procedure. Example 7.3.2 of ISO TR 14049 (production of cream and low-fat milk from crude milk) is a different type of situation. It is presented as a hybrid between allocation based upon physical relationships and upon economic value


It is presented as a hybrid between allocation based upon physical relationships and upon economic value. It is argued that as high-fat cream is economically more significant (per kg), fat content might be the appropriate basis for allocation rather than mass. In the end, however, it is indeed economics that supplies the basic rationale for partitioning, fat content being an only part-valid indicator for economic value per kg. As with any economic process, the total price of its outputs is its raison d’ tre and the economic proceeds per kg of the different outputs is therefore the most reasonable figure for allocating the outputs. Of course, mass or any other physical parameter can also be used as an indicator Part 3 : Scientific background


for this relative economic value (being stabler than price, for instance, or easier to determine), but only if its value as an indicator has already been proven. On this reasoning, step 2 of ISO 14041 is no longer to be considered a separate step in the procedure for partitioning; in fact, the relative added economic value of the respective outputs is the most basic allocation parameter available1. The next section therefore focuses on economic allocation, the most satisfactory allocation method available. 5. Economic allocation (step 3 of IS0 14041) 5.1 Introduction The situation examined here is that arrived at in the final step of the ISO allocation procedure. Where possible, allocation has already been avoided (although several remarks will be made on the topic); substitution has been postponed as an approach that is not systematically applicable; and physical allocation has been performed, as in some cases of combined waste treatment


Generally speaking, the core system that results will still be multifunctional. The aim of this final step, then, is to model the economic value of the inputs and outputs of this multifunctional system, so that these values can be used as an allocation key. To this end market prices are generally employed, these reflecting the basic fact that in a market economy production processes are ultimately driven by the proceeds they command. In principle, this allocation method is quite straightforward, employing as it does the kind of cost allocation and cost analysis that is widely applied in business economics. Problems may arise, though, (1) when markets (and therefore prices) are lacking, (2) when prices are ‘distorted’, as with imperfectly functioning markets (e.g. monopolies), or (3) owing to government intervention. Examples of the latter include certain forms of subsidy and compulsory reuse, and processes that are subject to permits


monopolies), or (3) owing to government intervention. Examples of the latter include certain forms of subsidy and compulsory reuse, and processes that are subject to permits. These issues are elaborated in greater detail in Part 2b of this Guide2. Below, in Section 0, we briefly explore two examples, on a provisional, qualitative basis: use of housing demolition waste and incinerator floor ashes in road building, the first in a situation of market equilibrium and the second with government induced market failure. Although our approach to economic allocation is based on traditional cost analysis, as employed by neoclassical economics, we deviate in several important respects.lt is not the place here to embark on a general critique of neo-classical economics. It may be noted, though, that LCA represents one way of dealing with market imperfections usually treated otherwise by economists of the neo-classical school


It may be noted, though, that LCA represents one way of dealing with market imperfections usually treated otherwise by economists of the neo-classical school. In this sense, the very exercise of LCA is a response to the failure of markets to properly account for environmental effects. First, however, we provide an outline of the basic principles of economic allocation. Before the allocation problem is tackled, the system under study must be clearly defined, already based to some extent on price-related criteria (see Figure C4). If a physical flow is unpriced or has a zero or negative price, it should be allocated to the functional flow or flows. This, at least, is the case for all environmental interventions (flows 1 in Figure C4). With waste to be processed, the direction of payment determines whether the flow is to be allocated, or allocated to


With waste to be processed, the direction of payment determines whether the flow is to be allocated, or allocated to. If it is an inflow to process X, the waste is a functional flow and constitutes one of the flows to which non-functional flows should be allocated (flows 2 in Figure C4). If it is an outflow from process X, the waste is a non-functional flow and constitutes one of the flows to be allocated to the functional flows (flows 3 in Figure C4). In the case of products, i.e. flows with a positive economic value, the direction of payment again determines whether the flow is to be allocated, or allocated to. If it is an inflow to process X (flows 4 in Figure C4), the product is a non-functional flow and constitutes one of the flows to be allocated to the functional flows. If it is an outflow from process X (flows 5 in Figure C4), the product is a functional flow to which non-functional flows are to be allocated


If it is an outflow from process X (flows 5 in Figure C4), the product is a functional flow to which non-functional flows are to be allocated. 1 The actual need for the various outputs in society is of course even more basic, but can rarely if ever be quantified. Only if the market value of proceeds deviates markedly from the value that would have arisen in a well-developed market should a more suitable price level be sought (as when a novel process has not yet been upscaled, so that development costs still weigh heavily). 2 Although some of these issues might be covered by more complex types of economic modeling, such models are beyond the practical scope of LCA and are therefore not further considered here. Part 3: Scientific background


Economic allocation can thus be based on the following rule of thumb. Environmental interventions, as well as all those flows for which process X pays other processes, are allocated to the functional flows, while flows for which process X is paid are allocated to (cf. the grey arrows in Figure C4). As the most general case we usually think of prices in market terms, i.e. as deriving ultimately from consumer preferences. Some goods and services may be government-provided, however, with no markets involved, as in the case of road building or education. It is then not final consumer demand in the marketplace that drives the economic chain, but public demand, driven by a politically guided decisionmaking process. As long as the products in question are purchased in the market, though, their price can be derived in much the same way as for consumer goods, for public demand is similarly reflected in the cost of supply, usually equal to the budget expenditure involved


In economic terms, the derived utility is at least as high as the utility forfeited by expenditure on the product in question (for otherwise something else would have been purchased). Thus, in the sphere of collective expenditures too, economic (i.e. market) value or budget expenditure can be taken as the basis for allocation. 5.2 Examples of economic allocation By way of illustration, then, let us consider two examples. CASE 1: USE OF HOUSING DEMOLITION WASTE IN ROAD BUILDING After functional use, a house is ‘discarded‘. As a subsequent process the discarded house is demolished, with several inputs required and several flows resulting. One of these flows (pulverised bricks, say) can be used in road building, providing a stylised example that stands for the more general case of recycling. By varying the prices of the flows concerned, several system definitions and solutions to allocation can be illustrated


By varying the prices of the flows concerned, several system definitions and solutions to allocation can be illustrated. To arrive at a system definition, it must be clear what question is to be answered and hence what functional unit is being analysed. One might, for example, wish to assess a specific technology for processing the waste flow in question and using it in a new application. In that case a difference analysis can be applied to the two systems together, with both functions represented in the functional unit. The alternative with which the comparison is to be made is a different mode of processing the demolition waste flow, e.g. without a functional application, and a different mode of supplying the input for road building, e.g. using primary materials. This analysis for technology choice is a legitimate one. It does not require allocation between dwellings and roads and in that sense is complete when the system boundaries have been set in the difference analysis


It does not require allocation between dwellings and roads and in that sense is complete when the system boundaries have been set in the difference analysis. Allocation may still be necessary, e.g. for the multiple processes involved in manufacturing the plant for processing discarded bricks. Alternatively, one might wish to compare different housing systems having the same functional unit, with one of the alternatives involving the three processes described in the example in Figure C5 below. Some form of allocation is therefore required here. Four situations (a to d) are described here with respect to the values of the respective flows (see Figure C5). In variant a, the value of the discarded building is positive. The demolition processor pays the owner of the discarded house for being allowed to demolish it, thus paying for his ‘secondary raw materials’. The building has then had two functions: housing, as the functional unit investigated, and materials provision


The building has then had two functions: housing, as the functional unit investigated, and materials provision. Part 3 : Scientific background


Part 3: Scientific background


(With other products such as ships, this is quite often the case.) Part of housing construction is then allocated to the function of materials provision. All the processes required for the functioning of the building solely as a dwelling, such as heating and cleaning, are there for that function only and are therefore not allocated to the discarded house. If the building materials (bricks, isolation material, window frames etc.) have been applied in the building in such a way that they can be separated only by being dismantled together, as may be reasonably assumed, the whole building demolition process is to be allocated partly to the housing function and partly to the materials-providing function. Then it is not some fraction of brick production that should be allocated to the brick waste, but also a fraction of total construction and maintenance, as being connected to the use process of the house


The resource use and emissions of the demolition process itself, and its other economic inputs and outputs, should all be allocated to the secondary uses. This example covers all cases involving two products from the same process (i.e. it is also valid for multi-output and multi-input processes). Formula: Allocation to be based on the share of each function in total proceeds. Total proceeds are the sum of the two functions, the value of housing and the value of the discarded building. Variant b treats the special case in which the discarded house has zero value. In environmental terms, the input of the discarded house to the demolition process is then also ‘for free’. The processing of the discarded product makes not contribution to the environmental interventions of the housing system. When comparing this to an alternative, such as dedicated waste processing without further applications, there is a clear advantage


When comparing this to an alternative, such as dedicated waste processing without further applications, there is a clear advantage. As the boundary lies exactly between two processes, no allocation is needed. In some cases in which a discarded product has a low negative value, transport to the processor may be the first upgrading step to make the value (near) zero. The system boundary should then be defined so as to include this transport. Formula: No allocation is required, as there is no process at the system boundary. In variant c, disposing of the discarded house cannot be paid for from the proceeds of processing it, as in variant a, and the owner will consequently have to pay the demolition firm. Besides waste management, demolition, (including processes like sorting) will then also provide another function: one or more secondary products. In this case no fraction of building construction or maintenance is allocated to these secondary products


In this case no fraction of building construction or maintenance is allocated to these secondary products. Formula: Allocation to be based on the share of each function in total proceeds. Proceeds are from waste processing and from sales of secondary products. In variant d, the flow used in road building still has a negative value, implying that its functional contribution to the road is negative, the road application essentially being a form of waste processing to be allocated to the functional use of having the house. We assume there are no other flows with a positive value (which would be equivalent to variant c). The system boundaries of the housing function then include the full process of demolition plus processing, as well as part of the next process, road building. The road-builder is then paid to accept the demolition waste and thus has waste processing as a co-product. Formula: Allocation to be based on the share of each function in total proceeds


The road-builder is then paid to accept the demolition waste and thus has waste processing as a co-product. Formula: Allocation to be based on the share of each function in total proceeds. The value of the road produced is measured in terms of its price, the value of waste processing in terms of payments to the road builder. How to further interpret the outcome of this variant d? If the cost of using demolition waste in a road exceeds that of using primary materials and the environmental consequences are also greater, taking into account ‘all’ the environmental effects allocated to the road, the reasonable conclusion would be that promoting this type of secondary use by regulatory means would be erroneous. If the costs are higher and the environmental effects lower (or vice versa), a trade-off has to be made between costs and environmental effects


If the costs are higher and the environmental effects lower (or vice versa), a trade-off has to be made between costs and environmental effects. CASE 2: USE OF WASTE INCINERATOR FLOOR ASHES IN ROAD BUILDING In the Netherlands floor ash from municipal waste incineration plant is used as a road building material. Its function is similar to sand, but the resultant road quality is somewhat higher. Because of the toxic substances in the ash, especially heavy metals, certain measures must be taken in road construction to isolate these substances from the environment. Also, after its useful life, the road must be demolished, with the incorporated ash having to be treated as toxic waste. In this case there are two quite different questions on which LCA may provide decision support: a. a comparison of different technologies for a particular process, e.g. waste treatment of incinerator ash, some of which yield co-products Part 3 : Scientific background


b. a comparison of different alternatives for a particular function system, e.g. milk packaging incineration (as part of ‘milk drinking’) or road foundation construction, as part of a transport system. a. Technology comparison The first type of question is concerned with how a form of waste treatment producing a positive economic value compares with other forms of treatment, e.g. storing the ash in a controlled landfill and using sand, or gravel or other waste flows as a road building material. The functional unit is a combined one, comprising processing of a given waste flow and disposing over a given section of road for a certain period of time. This question requires no allocation between the waste-producing function(s) and road foundation construction. The analysis can be set up as a difference analysis between the two (or three or more) alternatives to be compared. Elements common to all of them can be omitted from the analysis


The analysis can be set up as a difference analysis between the two (or three or more) alternatives to be compared. Elements common to all of them can be omitted from the analysis. For each alternative, the same set of functions is delivered, waste management for the function of milk drinking and road construction for the function of transport. Although this procedure has similarities with substitution, here nothing is ‘avoided’: each alternative stands on its own. The key question here is how the system boundaries are to be defined for the different ash-processing technologies. On the incinerator side, there is only one technical alternative, leading to the floor ashes from combustion. On the road side, there are different alternatives to be compared. In the difference analysis, common elements may be omitted from the analysis. Let us assume for simplicity that road quality, in terms of maintenance requirements and lifetime, is the same in all alternatives


Let us assume for simplicity that road quality, in terms of maintenance requirements and lifetime, is the same in all alternatives. The only additional item to be included in the road-building alternative using incinerator ash is then the environmental isolation of the ashes in road construction. After its useful life the road is ‘discarded’, at which stage the ash-related waste management activities must also be included in the analysis. The kind of waste management then required is a matter of regulatory technical specification. Let us assume that second-time use is unattractive, as the ash has become mixed with other materials and isolation is becoming increasingly difficult. Final disposal of the ash-containing waste must then be included in the analysis. Let us assume that use of primary sand is another alternative, using sand available nearby. When ‘discarding’ the road, the sand would not constitute a waste material but could subsequently be used as a stable filling material


When ‘discarding’ the road, the sand would not constitute a waste material but could subsequently be used as a stable filling material. Let us assume that the value as a filling material from discarded road is zero, so there are no further processes to take into account. By comparing the outcomes of the different alternatives, an indication can be obtained of which technology is environmental superior. Although allocation may still have to be applied to upstream processes, e.g. those producing plant and equipment and energy for transport, in all other respects it will have been avoided, by formulating the question in a specific manner in which values and market prices play a role in only in setting system boundaries. no role. The Dutch government has made it more or less obligatory for incinerator floor ash to be used in road construction


no role. The Dutch government has made it more or less obligatory for incinerator floor ash to be used in road construction. Is this indeed the best processing option? This question can be answered only by comparing this option with the relevant alternatives, in the manner indicated. As LCA treats environmental effects now and in the future consistently (there is no ‘discounting’ of environmental effects) the outcome of the analysis might very well be that it would have been better to store the ash immediately, especially as more effective isolation measures could then have been taken. Toxic emissions would then certainly have been less, as indeed would land use, as disposal of the final ashcontaining road waste requires a greater area of land because of the unavoidable mixing with other materials. As the associated costs are probably also higher, this regulatory measure would have negative environmental effects


As the associated costs are probably also higher, this regulatory measure would have negative environmental effects. As yet unspecified, but net positive, effects in comparison with the alternatives, are the only thing that can shift the balance in favour of use of incinerator ash for road building. (This reasoning should, of course, be substantiated in a more precise, quantified analysis.) In the context of road building a third alternative is for the incinerator ash to be intricately mixed with all the other road-building materials used, in which case it can no longer be regarded as a separate entity (like fly ash in concrete), with the option of simplifying the double system by making a difference analysis, specifying only those parts of the system that differ between the alternatives


Separate specification of 'only floor ash-related processes’ in the road system is then impossible, and waste management of the discarded road in its entirety must be accounted for in the housing-plus-road analysis. b. Function system comparison Now the question is how two or more options for delivering a particular function compare, so each alternative is to be specified in terms of this one function only. As an example, we compare a road built without floor ashes and a functionally equivalent road in which incinerator ash is used as a filling material. This involves all sorts of multifunctional processes. We focus our discussion on one such process chain, Part 3: Scientific background


specifying the boundary between the incinerator and the road system. The standard analysis would be to use the values of the flows involved first for specifying the system boundary for each function delivered to another product system and next for allocation at such boundaries. One practical problem is that prices are generally lacking when it comes to road waste management. A procedure can then be adopted to ‘construct’ market prices, as a way of establishing the relative importance of the different outputs in delivering the functional unit ‘x kilometres of road’. The advantages and disadvantages of economic allocation are reviewed in the box below. Advantages and drawbacks of economic allocation – The main advantage of this method is that it can be consistently applied to all partitioning situations and for drawing system boundaries in general


Advantages and drawbacks of economic allocation – The main advantage of this method is that it can be consistently applied to all partitioning situations and for drawing system boundaries in general. However, using an economic parameter for allocation implies basically accepting price structures as they stand, and assuming these to be established in perfect markets. Certain market failures have been addressed above, keeping to the basic price structure as a default approach. The fundamental assumption that neo-classical economics can be satisfactory applied for the purposes of allocation is questionable. – Particularly in the case of environmental analyses investigating a recycling option or optional use of secondary material, there may be no emerging (recycling) markets with prices on which to base allocation. Generally, the market tends to have a negative perception of these materials, causing a barrier to adequate pricing


Generally, the market tends to have a negative perception of these materials, causing a barrier to adequate pricing. In some cases, this perception is initially countered by government subsidies. This may be the case in the example of using demolition waste in road construction (the price would be lower if the market had accepted this alternative and if there was efficient infrastructure for its production). In such cases, production costs can be used to determine the actual price, or the relative material quality can be used as an alternative measure of the economic value of the secondary material. – Using multi-output allocation for recovered material with a positive economic value suggests that the user takes this co-production into account when deciding to buy the product. This is not generally the case


This is not generally the case. (Note that even when markets acknowledge the positive economic value of returned glass cullet, say, they do not pay the consumer for it, as the consumer is willing to discard it voluntarily.) Part 3 : Scientific background


ISO 14040 and ISO 14044 Commentaries © 2006 ecomed publishers (Verlagsgruppe Hüthig Jehle Rehm GmbH), D-86899 Landsberg and Tokyo • Mumbai • Seoul • Melbourne • Paris Int J LCA 11 11 (2) 80 – 85 (2006) Commentaries The New International Standards for Life Cycle Assessment: ISO 14040 and ISO 14044 Matthias Finkbeiner1*, Atsushi Inaba2, Reginald B.H. Tan3, Kim Christiansen4 and Hans-Jürgen Klüppel5 1DaimlerChrysler AG, Mercedes Car Group, Design-for-Environment, HPC X602, 71059 Sindelfingen, Germany 2Research Center for Life Cycle Assessment, National Institute of Advanced Industrial Science and Technology (AIST), 16-1 Onogawa, Tsukuba, Ibaraki 305-8569, Japan 3Department of Chemical and Biomolecular Engineering, National University of Singapore, 10 Kent Ridge Crescent, Singapore 119260 42.-0 LCA consultants, Amagertorv 3, 1160 Copenhagen K, Denmark 5Henkel KGaA, WEQ-Quality and Environment, Henkelstr

Finkbeiner et al., The New International Standards for LCA: ISO 14040 & 14044, Int J LCA 11(2):80–85 (2006)


67, 40191 Düsseldorf, Germany * Corresponding author (matthias.finkbeiner@daimlerchrysler.com) Recommendation and Outlook. Currently the national member bodies undertake the final voting on the FDIS-versions of the standards. Based on the voting results at the previous stages of the documents, a positive result is expected. The publication of the new international standards for life cycle assessment (ISO 14040 and ISO 14044) is expected around mid-2006. For the sake of the international and stakeholder acceptance of LCA, it is recommended that the new standards serve as core reference documents for the users and practitioners of LCA. Keywords: ISO; ISO-standards; ISO 14040; ISO 14041; ISO 14042; ISO 14043; ISO 14044; Life Cycle Assessment (LCA) DOI: http://dx.doi.org/10.1065/lca2006.02.002 Abstract Background, Aims and Scope