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The concept of the eco-costs

Eco-costs are a measure to express the amount of environmental burden of a product on the basis of prevention of that burden. It are the costs which should be made to reduce the environmental pollution and materials depletion in our world to a level which is in line with the carrying capacity of our earth.
For example: to prevent 1000 kg CO2 emission, one should invest € 116,- in offshore windmill farms (and the other CO2 reduction systems at that price or less). When this is done consequently, and all possible prevention measures which are less expensive are taken as well, the total CO2 emissions in the world will be reduced by 70% compared to the emissions in 2008. As a result global warming will stabilise. In short: "the eco-costs of 1000kg CO2 are € 116,-".
Similar calculations can be made on the environmental burden of acidification, eutrification, summer smog, fine dust, eco-toxicity, and the use of metals, rare earth, fossil fuels, water and land (nature). As such, the eco-costs are virtual costs, since they are not yet integrated in the real life costs of current production chains (Life Cycle Costs). The eco-costs should be regarded as hidden obligations: this is also called "external costs".
The business relevance of eco-costs is that it is the financial risk of non-compliance with future governmental regulations. Cleaver entrepeneurs are proactive and reduce the eco-costs of their products and services by innovation: ecoefficient value creation.

The practical use of eco-costs is to compare the sustainability of different product and/or services with the same functionality. This is done by Life Cycle Assessment (LCA), see Fig. 2.1a. The eco-costs can be used in classical LCA, applying classical software programmes like Simapro. However, the eco-costs system provides also a practical method for LCA, which is called "Fast Track LCA". This is a practical method for designers and business managers, based on Excel look-up tables. Fast Track LCA enables accurate calculations is a short time span (hours, rather than weeks), and is as accurate as the classical calculations with standard computer software. Complex issues as recycling and combustion at the End of Life are facilitated in an easy and logical way by means of these tables (see tab LCA).The advantage of eco-costs is that the output of these calculations is expressed in a monetary value (€ or US$), which appears to be easily understood ‘by instinct’.

The analysis of all emissions of a life cycle (Fig. 2.1a) results in a long list of toxic substances. Such a long list of emissions does not make sence, so the list has to be 'compressed' to 1 'single indicator'. Eco-costs is such an indicator. There are many other 'single indicators' for LCA. Basically they fall in three categories:
- single issue
- damage based
- prevention based

The best known 'single issue' indicator is the carbon footprint: the total emissions of kg CO2, or kg CO2 equivalent (taking methane and some other greenhouse gasses into account as well). The advantage of this single issue indicator is, that its calculation is simple and transparent, without any complex assumptions. It is easy as well to communicate to the public. The disadvantage is that is ignores the problems caused by other pollutants and it is not suitable for cradle to cradle calculations (because materials scarcity is not taken into account).
The most common single indicators are damage based. This stems from the period of the 1990s, when LCA was developed to make people aware of the environmental damage of production and consumption. The advantage of damage based single indicators is, that they show people that they should consume less, and make companies aware that they should produce cleaner. The disadvantage is that these damage based systems are very complex, not transparent for others than who make the computer calculations, need many assumptions, and suffer from the subjective weighting procedure at the end. Communication of the result is not easy, since the result is expressed in 'points' (attempts to express the results in money were never very successful, because of methodological flaws and uncertainties).
Prevention based indicators, like the system of the eco-costs, are relatively new. The advantage, in comparison to the damage based systems, is that the calculations are relatively easy and transparent, and that the results can be explained in terms of money and in measures to be taken. The system is focused on the decision taking processes of architects, business people, designers and engineers. The disadvantage is that the system is not focused on the fact that people should consume less.

The classical way to calculate a 'single indicator' in LCA is to group pollutants in 'classes', multiplied by a 'characterisation' factor to account for their relative importance within a class. Then, the pollutants are totalised to the level of their 'midpoint' effect (global warming, acidification, nutrification, etc.). The classical problem is then to determine the relative importance of each midpoint effect. This is done by 'normalisation' (= comparison with the pollution in a country or a region) and 'weighting' (= giving each midpoint a weight, to take the relative importance into account) by an expert panel.
The calculation of the eco-costs is based on classification and characterisation tables as well, however has a different approach to the normalisation and weighting steps. See adjacent figure bigger. 'Normalisation' is done by calculating the marginal prevention costs for a region (i.e. the European Union), as described at the web page on the eco-costs of emissions. The weighting step is not required in the eco-costs system, since the total result is the sum of the eco-costs of all midpoints. The advantage of such a calculation is that the marginal prevention costs are related to the cost of the most expensive Best Available Technology which is needed to meet the target, and the corresponding level of Emission Allowances which is required in future. Example: For reduction of CO2 emissions to a sustainable level, the marginal prevention costs are the costs of replacement of coal-fired power plants by windmill farms at the sea.

The eco-costs have been calculated for the situation in the European Union. It might be argued that the eco-costs are also an indication of the marginal prevention costs for other parts of the globe, under the condition of a level playing field for production companies.

The table below provides data for emissions of toxic substances as applied in the eco-costs 2017 system Version 1.6. The midpoint tables are recommended by the ILCD.

category multipier (marginal prevention costs midpoint table
eco-costs of acidification
8.75 €/kg SOx equivalent ILCD 2011 Midpoint+ (incl. country factors)
eco-costs of eutrophication 4.17 €/kg phosphate equivalent CML-IA baseline
eco-costs of ecotoxicity
340.0 €/kg Cu equivalent UseTox 2
eco-costs of human toxicity 3754 €/kg Benzo(a)pyrene equivalent UseTox 2
eco-costs of summer smog (respiratory diseases) 6.0 €/kg NOx equivalent LOTOS-EUROS model
eco-costs of fine dust 35.0 €/kg fine dust PM2.5 equivalent UNEP/CETAC plus ILCD 2011 Midpoint+
eco-costs of global warming 0.116 €/kg CO2 equivalent IPPC 2013, 100 years

In addition to abovementioned eco-costs for emissions, there is a set of eco-costs to characterize the 'midpoints' of resource depletion:
- eco-costs of abiotic scarcity (metals, including rare earth, and energy carriers)
- eco-costs of land-use change (based on loss of biodiversity, e.g. used for eco-costs of tropical hardwood)
- eco-costs of water (based on the Baseline Water Stress iIndicator - BWS - of countries)
- eco-costs of landfill

The abovementioned marginal prevention costs at midpoint level can be combined to 'endpoints' in three groups, plus global warming as a separate group:

- eco-costs of human health = the sum of carcinogens, summer smog, fine dust
- eco-costs of ecosystems = the sum of acidification, eutrophication, ecotoxicity
- eco-costs of resource scarcity = the sum of abiotic depletion (scarcity of metals, REE, and energy carriers), land-use, water, and land-fill
- eco-costs of global warming = the sum of CO2 and other greenhouse gases (the GWP 100 table)
- total eco-costs = the sum of human health, ecosystems, resource depletion and global warming

Since the endpoints have the same monetary unit (e.g. euro, dollar), they are added up to the total eco-costs without applying a 'subjective' weighting system. This is an advantage of the eco-costs system (see also ISO 14044 section and 4.4.5). So called 'double counting' (ISO 14044 section is avoided in the eco-costs system.

The eco-costs of global warming (also called eco-costs of CO2) can be used as an indicator for the carbon footprint. The eco-costs of resource depletion can be regarded as an indicator for 'circularity' in the theory of the circular economy. However, it is advised to include human toxicity and eco-toxicity, and include the eco-costs of global warming in the calculations on the circular economy as well. The eco-costs of global warming are required to reveal the difference between fossil-based products and bio-based products, since biogenic CO2 is not counted in LCA (biogenic CO2 is part of the natural recycle loop in the biosphere). Therefore, total eco-costs can be regarded as a robust indicator for cradle-to-cradle calculations in LCA for products and services in the theory of the circular economy. Since the economic viability of a business model is also an important aspect of the circular economy, the added value of a product-service system should be part of the analysis. This requires the two dimensional approach of Eco-efficient Value Creation, see reference 1.3, as described at the Wikipedia page on the model of the Ecocosts/Value Ratio, EVR.

The eco-costs method is not the only prevention based indicator system. The eco-costs are calculated for the situation of the European Union, but are applicable worldwide under the assumption of a level playing field for business, and under the precautionary principle. There are two other prevention based systems, developed after the introduction of the eco-costs, which are based on the local circumstances of a specific country:
- In the Netherlands, ‘Milieu Kosten Indicator’ (Environmental Costs Indicator system), a kind of system for 'shadow prices' have been developed in 2004 by TNO/MEP on basis of a local prevention curves: it are the costs of the most expensive prevention measure required by the Dutch government for each midpoint. It is obvious that such costs are relevant for the local companies, but such a shadow price system doesn’t have any meaning outside the Netherlands, since it is not based on the no-effect-level
- In Japan, a group of universities have developed a set of data for maximum abatement costs, for the Japanese conditions. The development of this set of abatement costs started in 2002 and has been published in 2005. The so-called avoidable abatement cost (AAC) in this method is comparable to the eco-costs.