Approaches to LCA-Economic Input-Output Life Cycle Assessment - Carnegie Mellon University

Approaches to Life Cycle Assessment

Assessing the environmental burdens of a product, process, or service can be a daunting task.  An initial approach to completing a life cycle assessment is a process-based LCA method.  In a process-based LCA, one itemizes the inputs (materials and energy resources) and the outputs (emissions and wastes to the environment) for a given step in producing a product.  So, for a simple product, such as a disposable paper drinking cup, one might list the paper and glue for the materials, as well as electricity or natural gas for operating the machinery to form the cup for the inputs, and one might list scrap paper material, waste glue, and low quality cups that become waste for the outputs. 

However, for a broad life cycle perspective, this same task must be done across the entire life cycle of the materials for the cup and the use of the cup.  So, one needs to identify the inputs, such as pulp, water, and dyes to make the paper, the trees and machinery to make the pulp, and the forestry practices to grow and harvest the trees.  Similarly, one needs to include inputs and outputs for packaging the cup for shipment to the store, the trip to the store to purchase the cups, and that result from throwing the cup in the trash and eventually being landfilled or incinerated.  Even for a very simple product, this process-based LCA method can quickly spiral into an overwhelming number of inputs and outputs to include.  Now, imagine doing this same process-based LCA for a product such as an automobile that has over 20,000 individual parts, or a process such as electricity generation.  

Two main issues arise with process-based LCA methods.  One is defining the boundary of the analysis.  An initial step of a process-based LCA is defining what will be included in the analysis, and what will be excluded and ignored.  For the paper cup example, one might choose to exclude the impacts for making the steel and then manufacturing the processing equipment that makes the cups.  Establishing the boundary limits the scope of the project and thus the time and effort needed to collect information on the inputs and outputs.  While necessary to create a manageable LCA project, defining the boundary for the analysis automatically limits the results and creates an underestimate of the true life cycle impacts.  

The other main issue with process-based LCA methods is circularity effects.  In our modern world, it takes a lot of the same "stuff" to make other "stuff."  So, to make the paper cup requires steel machinery.  But to make the steel machinery requires other machinery and tools made out of steel.  And to make the steel requires machinery, yes, made out of steel.  Effectively, one must have completed a life cycle assessment of all materials and processes before one can complete a life cycle assessment of any material or process.  

Completing a broad, robust life cycle assessment thus requires many assumptions and decisions that make life cycle assessment a very complex and time consuming endeavor.  This is where econonmic input-output LCA approaches enter and help simplify LCAs.

Economic Input-Output Models

Economic input-output (EIO) models represent the monetary transactions between industry sectors in mathematical form.  EIO models indicate what goods or services (or output of an industry) are consumed by other industries (or used as input).  As an example, consider the industry sector that produces automobiles.  Inputs to the automobile manufacturing industry sector include the outputs from the industry sectors that produce sheet metal, plate glass windshields, tires, carpeting, as well as computers (for designing the cars), electricity (to operate the facilities), etc.  In turn, the sheet metal, plate glass windshield tire, etc. industry sectors require inputs for their operations that are outputs of other sectors, and so on.  Each of these requirements for goods or services between industry sectors is identified in an EIO model. 

EIO models are usually presented in matrix form where each row and each column represent a single industry sector, and the intersection of a row and column identifies the economic value of output from the row sector that is used as input to the column sector.  In this form, EIO models have two helpful characteristics.  First, EIO models indicate if output of an industry sector is required as input to the same industry sector (i.e., a value along the diagonal of the matrix is non-zero).  For example the oil and gas extraction industry may produce the oil and gas to power its own facilities, or the computer design and manufacturing industry produces computers that are used to design the next generation of computers.  Secondly, using some basic linear algebra techniques (described in the theory and method section), EIO models identify the direct, the indirect, and total effects of changes to the economy.  Direct effects are the first-tier transactions, the transactions between one sector and the sectors that provide it output.  Indirect effects are the second-tier, third-tier, etc. transactions, the transactions among all sectors as a result of the first-tier transactions.  Total effects are the sum of direct and indirect effects.   

Economic input-output models are used to study changes in the demands or structure of the economy.  For example, if demand increases for output from the electricity industry sector, the EIO model can identify which industry sectors in the supply chain of the electricity industry, such as coal mining, natural gas exploration, or wiring and cabling will also have an increase in demand and by how much.  Over time, EIO models can identify when shifts in the economy have occurred, as outputs of industry sectors diminish and increase, such as the increase in output from service sectors in most developed countries.  EIO models aid decision-makers in estimating ripple effects of economic changes, including drastic changes.  For example, EIO models have been used to model growth in industry sectors that produce construction materials due to growth in industry sectors that provide construction services as a result of a major natural disaster such as Hurricane Katrina in the U.S. Gulf Coast region.  Support for growth cannot just be provided to the construction service industry; it must also be given to industries that produce lumber and other wood products, plumbing supplies, etc., otherwise the construction service industry will not have sufficient input for its services.

Most nations create economic input-output models of their economies to varying degrees of specificity and frequency.  The U.S. EIO models (benchmark accounts) are created every five years and represent the transactions among some 400 industry sectors.  The models are created based on survey data from a sample of all operating facilities from apple farms to zoos.  Other nations have similar models, albeit on a smaller scale (e.g., fewer number of sectors, less frequent data collection).

Combining Economic Input-Output Models and Life Cycle Assessment

The traditional economic input-output model (matrix) indicating economic transactions between industries can be appended with information on emissions to the environment.  In effect, this creates an additional column representing "the environment" sector, and the value in each row represents the pollutant "output" from an industry sector that is "input" to "the environment" sector.  Just as one can model how increased demand for output from one sector influences the output of other sectors, with an appended model one can also model how increased demand for output from one sector influences the output of pollutants to the environment.

This EIO-LCA approach eliminates the two major issues of boundary definition and circularity effects of process-based models.  First, since transactions and emissions of all industry sectors among all other industry sectors is included, the boundary is very broad and inclusive.  Even small transactions and emissions are included, such as those for producing the gasoline for the security truck of the contract security firm for the warehouse storing copper for the wiring in an automobile.  Second, since the self-sector transactions are included, circularity effects are included in the analysis.  

To Continue from Here... 

The EIO-LCA theory and method page provides an explanation of the mathematical derivation of the general EIO modeling theory and the theory for appending EIO models with environmental information.  It is not necessary to comprehend the mathematical derivation to understand and use the method, however.   Feel free to move on to the limitations of the EIO-LCA method page next.