The computational structure of environmental life cycle costing

Abstract

Purpose

Existing computational methods for life cycle costing (LCC) are few and appeared inconsistent with the very definition of LCC. This article improves the common matrix-based approach in life cycle assessment as applied to LCC, correcting previous errors.

Methods

Reusing a simple and hypothetical example, the authors derive the LCC from both the physical and monetary technology matrices. Accounting for the added value of all activities in the life cycle leads to a simplified computational structure for LCC.

Results and discussion

The results show that the definition of LCC and computational structure can be fully harmonized with life cycle assessments (LCAs) and simplified. In addition to eco-efficiency calculations, the vector of added values, if disaggregated over social groups, allows for distributional analysis. It is furthermore shown how LCC can account for costs shifting (economic externalities) in the same way as LCA highlights shifting of environmental externalities between different products, life cycle stages or actors.

Conclusions

Life cycle costing as defined by the sum of the added value over the life cycle is consistent with LCA and cradle to gate assessments in particular. The authors simplified the computation of LCC with either the matrix-based approach or the added values of upstream activities as an elementary exchange vector or matrix.