Life-cycle cost analysis

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Life-cycle cost analysis (LCCA) is an economic analysis tool to determine the most cost-effective option to purchase, run, sustain or dispose of an object or process. The method is popular in helping managers determine economic sustainability by figuring out the life cycle of a product or process.

Contents

Definition

The term differs slightly from Total cost of ownership analysis (TCOA). LCCA determines the most cost-effective option to purchase, run, sustain or dispose of an object or process, and TCOA is used by managers or buyers to analyze and determine the direct and indirect cost of an item. [1]

The term is used in the study of Industrial ecology (IE). The purpose of IE is to help managers make informed decisions by tracking and analyzing products, resources and wastes. [2]

Green Design and Building Economics

In Green design Managers add their operating costs and capital to help decide the effect of an investment. [3] The method also allows managers to determine if more investments may be needed for green buildings. [4]

See also

Related Research Articles

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Waste management or waste disposal includes the processes and actions required to manage waste from its inception to its final disposal. This includes the collection, transport, treatment and disposal of waste, together with monitoring and regulation of the waste management process and waste-related laws, technologies, economic mechanisms.

Industrial ecology (IE) is the study of material and energy flows through industrial systems. The global industrial economy can be modelled as a network of industrial processes that extract resources from the Earth and transform those resources into products and services which can be bought and sold to meet the needs of humanity. Industrial ecology seeks to quantify the material flows and document the industrial processes that make modern society function. Industrial ecologists are often concerned with the impacts that industrial activities have on the environment, with use of the planet's supply of natural resources, and with problems of waste disposal. Industrial ecology is a young but growing multidisciplinary field of research which combines aspects of engineering, economics, sociology, toxicology and the natural sciences.

<span class="mw-page-title-main">Life-cycle assessment</span> Methodology for assessing environmental impacts

Life cycle assessment or LCA is a methodology for assessing environmental impacts associated with all the stages of the life cycle of a commercial product, process, or service. For instance, in the case of a manufactured product, environmental impacts are assessed from raw material extraction and processing (cradle), through the product's manufacture, distribution and use, to the recycling or final disposal of the materials composing it (grave).

<span class="mw-page-title-main">Green building</span> To save the environment/resources

Green building refers to both a structure and the application of processes that are environmentally responsible and resource-efficient throughout a building's life-cycle: from planning to design, construction, operation, maintenance, renovation, and demolition. This requires close cooperation of the contractor, the architects, the engineers, and the client at all project stages. The Green Building practice expands and complements the classical building design concerns of economy, utility, durability, and comfort. Green building also refers to saving resources to the maximum extent, including energy saving, land saving, water saving, material saving, etc., during the whole life cycle of the building, protecting the environment and reducing pollution, providing people with healthy, comfortable and efficient use of space, and being in harmony with nature Buildings that live in harmony. Green building technology focuses on low consumption, high efficiency, economy, environmental protection, integration and optimization.’

<span class="mw-page-title-main">Sustainable urban infrastructure</span>

Sustainable urban infrastructure expands on the concept of urban infrastructure by adding the sustainability element with the expectation of improved and more resilient urban development. In the construction and physical and organizational structures that enable cities to function, sustainability also aims to meet the needs of the present generation without compromising the capabilities of the future generations.

<span class="mw-page-title-main">Green waste</span> Biodegradable waste

Green waste, also known as "biological waste", is any organic waste that can be composted. It is most usually composed of refuse from gardens such as grass clippings or leaves, and domestic or industrial kitchen wastes. Green waste does not include things such as dried leaves, pine straw, or hay. Such materials are rich in carbon and considered "brown wastes," while green wastes contain high in concentrations of nitrogen. Green waste can be used to increase the efficiency of many composting operations and can be added to soil to sustain local nutrient cycling.

Asset management is a systematic approach to the governance and realization of value from the things that a group or entity is responsible for, over their whole life cycles. It may apply both to tangible assets and to intangible assets. Asset management is a systematic process of developing, operating, maintaining, upgrading, and disposing of assets in the most cost-effective manner.

Material flow analysis (MFA), also referred to as substance flow analysis (SFA), is an analytical method to quantify flows and stocks of materials or substances in a well-defined system. MFA is an important tool to study the bio-physical aspects of human activity on different spatial and temporal scales. It is considered a core method of industrial ecology or anthropogenic, urban, social and industrial metabolism. MFA is used to study material, substance, or product flows across different industrial sectors or within ecosystems. MFA can also be applied to a single industrial installation, for example, for tracking nutrient flows through a waste water treatment plant. When combined with an assessment of the costs associated with material flows this business-oriented application of MFA is called material flow cost accounting. MFA is an important tool to study the circular economy and to devise material flow management. Since the 1990s, the number of publications related to material flow analysis has grown steadily. Peer-reviewed journals that publish MFA-related work include the Journal of Industrial Ecology, Ecological Economics, Environmental Science and Technology, and Resources, Conservation, and Recycling.

<span class="mw-page-title-main">Life-cycle engineering</span>

Life-cycle engineering (LCE) is a sustainability-oriented engineering methodology that takes into account the comprehensive technical, environmental, and economic impacts of decisions within the product life cycle. Alternatively it can be defined as “sustainability-oriented product development activities within the scope of one to several product life cycles.” LCE requires analysis to quantify sustainability, setting appropriate targets for environmental impact. The application of complementary methodologies and technologies enables engineers to apply LCE to fulfill environmental objectives.

Materials management is a core supply chain function and includes supply chain planning and supply chain execution capabilities. Specifically, materials management is the capability firms use to plan total material requirements. The material requirements are communicated to procurement and other functions for sourcing. Materials management is also responsible for determining the amount of material to be deployed at each stocking location across the supply chain, establishing material replenishment plans, determining inventory levels to hold for each type of inventory, and communicating information regarding material needs throughout the extended supply chain.

Ecological design or ecodesign is an approach to designing products and services that gives special consideration to the environmental impacts of a product over its entire lifecycle. Sim Van der Ryn and Stuart Cowan define it as "any form of design that minimizes environmentally destructive impacts by integrating itself with living processes." Ecological design can also be defined as the process of integrating environmental considerations into design and development with the aim of reducing environmental impacts of products through their life cycle.

<span class="mw-page-title-main">Sustainable packaging</span>

Sustainable packaging is the development and use of packaging which results in improved sustainability. This involves increased use of life cycle inventory (LCI) and life cycle assessment (LCA) to help guide the use of packaging which reduces the environmental impact and ecological footprint. It includes a look at the whole of the supply chain: from basic function, to marketing, and then through to end of life (LCA) and rebirth. Additionally, an eco-cost to value ratio can be useful The goals are to improve the long term viability and quality of life for humans and the longevity of natural ecosystems. Sustainable packaging must meet the functional and economic needs of the present without compromising the ability of future generations to meet their own needs. Sustainability is not necessarily an end state but is a continuing process of improvement.

<span class="mw-page-title-main">Sustainable engineering</span> Engineering discipline

Sustainable engineering is the process of designing or operating systems such that they use energy and resources sustainably, in other words, at a rate that does not compromise the natural environment, or the ability of future generations to meet their own needs.

BREEAM, first published by the Building Research Establishment (BRE) in 1990, is the world's longest established method of assessing, rating, and certifying the sustainability of buildings. More than 550,000 buildings have been 'BREEAM-certified' and over two million are registered for certification in more than 50 countries worldwide. BREEAM also has a tool which focuses on neighbourhood development.

<span class="mw-page-title-main">Circular economy</span> Regenerative system in which resource input and waste, emission, and energy leakage, are minimised

A circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. CE aims to tackle global challenges such as climate change, biodiversity loss, waste, and pollution by emphasizing the design-based implementation of the three base principles of the model. The three principles required for the transformation to a circular economy are: eliminating waste and pollution, circulating products and materials, and the regeneration of nature. CE is defined in contradistinction to the traditional linear economy. The idea and concepts of circular economy (CE) have been studied extensively in academia, business, and government over the past ten years. CE has been gaining popularity since it helps to minimize emissions and consumption of raw materials, open up new market prospects and principally, increase the sustainability of consumption and improve resource efficiency.

Life cycle thinking is a holistic approach to thinking about the environmental impact of products beyond manufacturing to also include extraction, consumption and end of life. This style of thinking considers the processes involved in the use of a product from the point of its creation to the end of its useful life. This is generally known as the product life cycle. Raw material extraction, material processing, transportation, distribution, consumption, reuse/recycling, and disposal are examined. This approach may also consider the processes needed for socioeconomic activities, such as utility use. When analysing life cycle impacts, the chosen assessment approach determines the scope of the evaluation, with some approaches incorporating social and economic factors in addition to environmental concerns.

Environmental systems analysis (ESA) is a systematic and systems based approach for describing human actions impacting on the natural environment to support decisions and actions aimed at perceived current or future environmental problems. Impacts of different types of objects are studied that ranges from projects, programs and policies, to organizations, and products. Environmental systems analysis encompasses a family of environmental assessment tools and methods, including life cycle assessment (LCA), material flow analysis (MFA) and substance flow analysis (SFA), and environmental impact assessment (EIA), among others.

A circular economy is an alternative way countries manage their resources, where instead of using products in the traditional linear make, use, dispose method, resources are used for their maximum utility throughout its life cycle and regenerated in a cyclical pattern minimizing waste. They strive to create economic development through environmental and resource protection. The ideas of a circular economy were officially adopted by China in 2002, when the 16th National Congress of the Chinese Communist Party legislated it as a national endeavour, though various sustainability initiatives were implemented in the previous decades starting in 1973. China adopted the circular economy due to the environmental damage and resource depletion that was occurring from going through its industrialization process. China is currently a world leader in the production of resources, where it produces 46% of the worlds aluminum, 50% of steel and 60% of cement, while it has consumed more raw materials than all the countries a part of the Organisation for Economic Co-operation and Development (OECD) combined. In 2014, China created 3.2 billion tonnes of industrial solid waste, where 2 billion tonnes were recovered using recycling, incineration, reusing and composting. By 2025, China is anticipated to produce up to one quarter of the worlds municipal solid waste.

Eco-restructuring is the implication for an ecologically sustainable economy. The principle of ecological modernization establishes the core literature of the functions that eco-restructuring has within a global regime. Eco-restructuring has an emphasis on the technological progressions within an ecological system. Government officials implement environmental policies to establish the industrial- ecological progressions that enable the motion of economic modernization. When establishing economic growth, policy makers focus on the progression towards a sustainable environment by establishing a framework of ecological engineering. Government funding is necessary when investing in efficient technologies to stimulate technological development.

Triple bottom line cost-benefit analysis (TBL-CBA) is an evidence-based economic method that combines cost–benefit analysis (CBA) and life-cycle cost analysis (LCCA) across the triple bottom line (TBL) to weigh costs and benefits to project stakeholders. The TBL-CBA process quantifies total net present value, return on investment, and project payback. TBL-CBA uses location-specific data to give asset owners and design professionals the flexibility and capability to provide a rigorous analysis of investment alternatives through all stages of planning and design.

References

  1. Bearfield, Domonic A.; Dubnick, Melvin J. (2016). Encyclopedia of public administration and public policy (Third ed.). Boca Raton: Routledge. p. 466. ISBN   978-1466569096.
  2. El-Haggar, Salah M. (2007). "Sustainable Development and Industrial Ecology". Sustainable Industrial Design and Waste Management: 85–124. doi:10.1016/B978-012373623-9/50005-8. ISBN   9780123736239 . Retrieved 15 December 2022.
  3. Eltamaly, Ali M.; Mohamed, Mohamed A. (2018). Advances in renewable energies and power technologies. Volume 2, Biomass, fuel cells, geothermal energies, and smart grids. Amsterdam, Netherlands: Elsevier Inc. pp. 231–313. ISBN   978-0-12-813185-5 . Retrieved 12 December 2022.
  4. Kubba, Sam (1 January 2012). "Chapter 10 - Green Design and Building Economics". Handbook of Green Building Design and Construction. Butterworth-Heinemann: 493–528. doi:10.1016/b978-0-12-385128-4.00010-x. ISBN   9780123851284 . Retrieved 12 December 2022.