Page 253 - Biofuels for a More Sustainable Future

228 Biofuels for a More Sustainable Future

sustainability in an objective manner. Approaches such as life-cycle sustain-
ability assessment (LCSA) provide a framework for quantifying the sustain-
ability of a man-made system (Kloepffer, 2008). The economic dimension
(and perhaps even the other dimensions) can be analyzed through life-cycle
costing (LCC).
There are commonly three levels by which LCC may be conducted: (1)
fLCC (financial LCC), (2) eLCC (environmental LCC), and (3) sLCC (soci-
etal LCC) (R€odger et al., 2017). The concepts behind fLCC, sometimes
called the conventional LCC, has its roots in a cost accounting method
(Life Cycle Initiative, 2011). It focuses on financial streams of a single actor
or entity. These would be items like investment cost, R&D cost, and rev-
enue of a single actor; an industrial or manufacturing firm, for example
(Hoogmartens et al., 2014). While the usual costs like raw materials, labor,
maintenance, and energy are necessarily included, end-of-life costs and
credit for by-products (as negative costs) may also be included if charged
to the manufacturer (Hoogmartens et al., 2014). In fLCC, the concept that
there is a difference between the present value and the future value of
numerically equal amounts of currency can be accounted for by discounting.
Inflation or interest rates can be reflected by the computation of a net present
1
value via a discount factor or present worth factor D ¼ i, where r is the
ð l + rÞ
prevailing interest rate and i is the period at which the cost was incurred. For
an annual recurring cost, P i , the net present value (NPV) may be computed
P n
as NPV ¼ P i i where r is the annual interest rate, i is the number of
i¼l l + rð
Þ
years after the present time when the cost was incurred, and n is the total
life of the project in years.
The eLCC is the full life-cycle assessment that integrates economic
aspects into environmental impacts assessment (Kloepffer, 2008). The key
difference between the fLCC and the eLCC is that all of the impacts on
the physical environment as a result of producing the product or service
are charged to the life-cycle cost, even if the costs are not borne by the pro-
ducer. Such costs are referred to as externalities because they are not nor-
mally paid for by the principal agent, and the purpose of eLCC is to
internalize them into the computations. Thus the eLCC expands to more
than one actor. For example, unless there is an imposed carbon tax, any dam-
age from climate change caused by the CO 2 generated from producing and
operating the vehicle is not charged to either the producer or the operator.
This example also illustrates the challenges faced in the expansion from an
fLCC to an eLCC. A financial or monetary cost needs to be assigned to the