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Life Cycle Assessment: Principles, Practice and Prospects
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that may be of interest but were not included in the study. This may mean referring to other
studies, or considering local non-LCA data, and the relationships between indicators included
and those not included, to draw inferences about expected impacts.

3.5 Input–output and hybrid input–output
Input–output analysis is a top-down economic technique, which uses monetary transactions
between economic sectors rather than physical flows to represent the interrelationships
between processes leading to the production of goods and services. As in process analysis,
where each process can involve both direct emissions to the environment and upstream
emissions in the supply processes, in input–output analysis direct emissions and resource
use arising from within each sector are identified and accumulated as the necessary inputs
from each sector. These are then calculated to supply final demand in any given sector. What
is special about input–output analysis is that the depth of the supply chain is effectively
infinite. Rather than truncating the supply chain when individual flows become seemingly
insignificant, as is done in process analysis, input–output analysis effectively traces the
supply chain comprehensively by resolving the infinite and circular nature of the transac-
tions between sectors. For example, it considers the inputs from transport to make electric-
ity, and the inputs of electricity to make trucks, and the inputs from trucks to make transport,
and so on.
The limitation of input–output analysis is the coarse categorisation of economic sectors. In
the 1995–96 input–output tables produced by the Australian Bureau of Statistics, the Austral-
ian economy is represented by 106 sectors (ABS 2001). The USA’s equivalent input–output
table includes about 500 sectors (Suh 2004), which, in terms of all the different types of goods
and services produced in the world, still represents a problem of gross aggregation. Two solu-
tions to this problem are to disaggregate the input–output data where more resolution is
needed, using more detailed economic data, or to use hybrid techniques where physical flows
from process analysis are integrated with the hybrid input–output data.

3.6 LCA-integrated life cycle costing
Life cycle costing (also referred to as life cycle cost analysis) is defined in the Life-cycle Costing
Manual as ‘an economic method of project evaluation in which all costs arising from owning,
operating, maintaining and ultimately disposing of a project are considered to be potentially
important to that decision’ (Fuller and Peterson 1996). Life cycle costing is not new, although
its similarities and synergies with LCA make it relevant here. Life cycle costing shares the life
cycle dimension of LCA. Also, much of the technology description and flows required in LCA
are also required in life cycle costing. Therefore it can make sense to undertake both evalua-
tions at the same time. There are, however, some important differences between LCA and life
cycle costing. These differences relate to the time value of money, the different perspectives of
cost, and the way in which costs and prices are defined (Table 3.1).
For a detailed guide to the life cycle costing method, refer to guides such as Fuller and Peterson
(1996). However, for integration of life cycle costing with LCA to provide generalised economic
information for options assessed within LCA, it is worth considering the following approach.
First, the economic perspective of the life cycle costing must be established; for example,
whether the costing is to be taken from the perspective of a manufacturer or other business, a
consumer, or a public authority, or to encompass broader or total societal costs. Once this is
determined, it will be possible to determine the point in the supply chain where costs will be

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