LCC Flashcards
What is LCC?
Life cycle costing
cost oriented life cycle assessment
addresses relevant costs & revenues accounted by actors & participants in a products life cycle
investigates different cost factors (labour, material, energy,…)
provides input for decision making process of a product
What are the three types of LCC?
Conventional LCC
Environmental
Societal
Explain conventional LCC.
- economic evaluation
- “real” internal costs, associated with a product ́s life cycle
Explain environmental LCC.
–Includes external costs, which are likely to be internalised in the decision-relevant future (e.g. through a carbon price, taxes)
–System boundaries & functional unit equivalent to LCA
Explain societal LCC.
–All costs covered by anyone in the society, whether today or in the long-term
-done by including all external costs in a monetarized form
–Includes stakeholders not directly related to the product system (governments, society)
What needs to be considereed in the goal and scope of the LCC?
- Assessment of costs over the whole life cycle
- Conventional LCC? Environmental LCC? Societal LCC?
- For hotspot identification and/or comparisons?
- Conducting LCC alone or complementary to an LCA?
- Relation to Sustainability?
What are external costs?
•External costs are costs that are NOT included in what the business bases its price on
•Inclusion of the monetised effects of negative environmental and social impacts not directly billed to the firm (consumer, government, etc.) that is producing, using, or handling the product
–> it imposes costs on people who are “external” to the producer and consumer of the polluting product
- private (to an individual or an organization) or social (whole society)
–> Outside the economic system, but inside the natural and social system
–> e.g., cost of health problems caused by harmful materials
–> also called externalities
Give an example of a negative externality.
the pollution of a lake by a company that affects people living next to it: it affects their life expectancy, but also the value of their property negatively
Give an example of a positive externality.
a country reduces its greenhouse gas emissions, but also other countries profit by this countries greenhouse gas reductions
What are internal costs?
Payment for initiation, operation and EoL Costs by directly involved stakeholder
- Connection to business costs, and liability.
- Concern all costs and revenues within the economic system
What costs are considered in which type of LCC?
Conventional LCC:
- assesses internal costs
Environmental LCC:
- assesses to be internalised external costs (external environmental costs)
Societal LCC:
- assesses further external societal costs
Why LCC?
- Overview & improved awareness of total costs
- Evaluation of alternative options in regard to purchasing, operating, and maintenance cost strategies
- Identification of optimisation potential
What are the three types of cost in LCC?
initial costs:
- design
- investments
- installation
operation costs:
- maintenance
- labor
- energy
EoL costs:
- replacement
- recycling
- disposal
What is a problem of LCC?
- only a representation of the economic dimension,
- -> NOT sufficient as a stand-alone assessment for sustainability
- Currently, most LCC studies have a pure focus on money flows, but not on the impact pathways
- NO defined approach & consensus on whether LCC should remain limited to the cost level (sum up of costs) or if the scope should be broadened to assessing impacts..(e.g., GDP, economic prosperity)
Should LCC be included in LCSA?
Different positions:
yes because it is relevenat for decision making on company level
no because it misses a link to sustainable development and fails to capture the full dimension of economic sustainability
