Economic Input-Output Life Cycle Assessment / Life Cycle Assessment and Green Design

Economic Input-Output Model X ij + Y i = X i ; X i = X j ;using A ij = X ij / X j (A ij *X j ) + Y i = X i in vector/matrix notation: A*X + Y = X => Y = [I - A]*X or X = [I - A] -1 *Y

Using a Requirements Model l Columns are a ‘production function’ or recipe for making $ 1 of good or service l Strictly linear production relationship – purchases scale proportionally for desired output. l Similar to Mass Balance Process Model – inputs and outputs.

Supply Chain Buildup l First Level: (I + A)Y l Second Level: A(AY) l Multiple Level: X = (I + A + AA + AAA + … )Y l Y: vector of final demand (e.g. $ 20,000 for auto sector, remainder 0) l I: Identity Matrix (to add Y demand to final demand vector) l A: Requirements matrix, X: final demand vector

Direct Analysis – Linear Simultaneous Equations l Production for each sector: l X i = a i1 X 1 + a i2 X 2 + …. + a in X n + Y i l Set of n linear equations in unknown X. l Matrix Expression for Solution: X(I - A) = Y X = (I - A) -1 Y l Same as buildup for supply chain!

EIO-LCA Implementation Use the 491 x 491 input-output matrix of the U.S. economy from 1997 Augment with sector-level environmental impact coefficient matrices (R) [effect/$ output from sector] Environmental impact calculation: E = RX = R[I - A] -1 Y

In Class Exercise l Two Sector Economy. l Model Final Demand $100 for Sector 1. l Haz Waste of 50 gm/$ in Sector 1 and 5 gm/$ in Sector 2. l Transaction Flows ($ billion) are: 12Final Dmd V.A

Solution l Requirements Matrix: Row 1: 0.15 and 0.25, Row 2: 0.2 and 0.05 l (I-A) inverse Matrix: Row 1: and 0.33, Row 2: and l Direct intermediate inputs: $15 of 1 and $20 of 2 l Total Outputs: $125.4 of 1 and $26.4 of 2 l Hazardous Waste: 6402 gm.

Paper vs. Plastic Cups: Comparison of Two Studies HockingEIO-LCAHockingEIO-LCA 100,000 Plastic cups 100,000 Paper cups Electricity [kWh]20-302, ,150 Air emissions [kg] Hocking, M. B. (1991), “Paper versus Polystyrene: A Complex Choice.” Science, Vol. 251, February 1, pp Lave, L. B., E. Cobas, C. Hendrickson and F. C. McMichael, “Using Input-Output Analysis to Estimate Economy-Wide Discharges,” Environmental Science and Technology, 29(9), pp , September 1995.

Example: CDs vs. Paper Conference proceedings: switch from paper to CDs New: $3 per CD ($1500 for 500 CDs) Old: 200 pages per person (300 people) –Double-sided –60,000 $0.05/page = $3,000 Production only

Economic Effects - 2 options PaperCDs

Some Environmental Effects

Analysis CDs: Win-win scenario Indirect effects much larger than direct Small direct effects within industry Proves supply chain management is critical for corporate pollution prevention efforts Need to identify sources of effects Detailed analysis can show “hot spots”

Using EIO-LCA to Improve Life Cycle Analysis You are a pharmaceutical manufacturer Need to do an LCA of main drug product You can’t include everything; what is in and what is out? –Drawing boundaries is an appropriate simplifying step - but it is an art not a shortcut Are you including/excluding the right parts?

Product Comparisons Need to compare equivalent designs - benefits equal Manufacturing, O&M, end-of-life costs Service life/durability/longevity (obsolescence, technological change) Valuing environmental burdens (Full Cost Accounting) Planning period, discount rate Discounted, annualized costs

Illustrative Example To make your life easier, you focus on your processes’ top 10 ‘direct inputs’ –Could get this from product manager, accounting, other departments –Assume that your primary inputs are the primary sources of impacts for LCA This is a common boundary assumption

Top ‘Direct’ Inputs for Drugs Chemicals Plastics Electricity Paperboard/ Boxes Paper Trucking Printing Computer Services Telephone Services Refined Petroleum (e.g. gas/diesel)

Actual “Top Ten” Economic Effects (incl. Supply Chain) Sector Econ. ($) Drugs $150,000 Wholesale trade $90,200 Advertising $75,000 Industrial chemicals $45,000 Miscellaneous plastics$30,000 Real estate mgmt.$21,000 … Accounting & auditing$20,000 Legal services $18,000 Electric utilities$16,000 Repair & maintenance$16,000 Paperboard containers $15,000 Paper mills $14,500 Trucking and courier $14,000 Your ‘direct’ top ten list would have ignored 6 of the actual top ten supply chain sectors (processes) for making drugs. “per million dollars of output”

What’s Missing? Would have only considered local (direct) impacts of purchases –i.e., the items your firm bought Would have completely ignored the ‘supply chain effects’ in the industry –i.e. for electricity, would have only considered local use, not systemwide use

Greenhouse Gas Sources (Total Supply Chain, MT CO 2 Equiv.) TotalLocal/Direct Total all sectors (49%) Electric services (utilities) (44%) Drugs (90%) Industrial chemicals (47%) Trucking and courier serv.247 (29%) Paper & paperboard mills (0.5%) Petroleum refining 61 (15%) Paperboard boxes 21 (50%) Plastics Products 11 (100%)

Overall View of Drug Manufacturing Business GWP There are significant emissions From the support services within the firm and also across supply chain Your initial boundary would have missed 50+% of greenhouse gases

Lessons Learned Your perception of ‘what matters’ is biased by local factors –Overestimates dependence on these items –Underestimates supply chain effects Our perceptions of ‘process inputs’ usually are goods not services –Services are not environmentally benign! Use EIO-LCA to help you frame your LCA problems and set your boundaries (screening) –Potentially as a starting point for conventional LCA

Reinforced Concrete Product Aggregates mining Cement production Iron ore mining Reinforcing steel production Reinforced concrete product End-of-life Landfilling Recycling Concrete production Electricity Chemical additives Coal miningLime Transportation involved

Simplified Process Model Input Requirements for a $2 Reinforced Concrete Product ($1 concrete and $1 steel)

Total Requirements Table from EIO-LCA for Inputs of a Reinforced Concrete Product

Inputs for a $2 Reinforced Concrete Product steel$1.17 concrete$1.01 cement $0.20 electricity$0.15 trucking services $0.13 sand and gravel$0.12 chemicals$0.08 coal mining$0.07 iron ore mining $0.04 lime$0.005 wholesale trade$0.10 banking$0.02 advertising$0.02 maintenance $0.02 computer services$0.01 eating places$0.008 air transportation$0.008 hotels$0.007 construction machines $0.004 paper$0.004 aluminum $0.003 plastics $0.003 postal services$0.003 fertilizers $0.001 meat $0.0003

RCRA Hazardous Waste Generators for $150,000 of Reinforced Concrete Using the Simplified Process Model

Top 10 RCRA Hazardous Waste Generators for a $150,000 of Reinforced Concrete Using EIO-LCA