Costs and Benefits: using Life Cycle Assessment and Cost Benefit Analysis to measure the environmental effectiveness of waste regulation Gary Parker Pira IWM & LCA Workshop 13 April 2004

Pira’s use of CBA and LCA RDC and Pira undertook a study* for the Commission in 2003 to analyse the costs and benefits of packaging recycling Ecolas and Pira are undertaking a study currently for the Commission on assessing the environmental, economic and social impacts of the EU Packaging Directive Pira is looking at environmental aspects such as re-usable packaging and environmental indicators * “Evaluation of costs and benefits for the achievement of reuse and recycling targets for the different packaging materials in the frame of the packaging and packaging waste directive 92/62/EC”

Pira’s use of Life Cycle CBA Pira produced a Life Cycle Cost Benefit Analysis model to compare recycling with disposal options The model combined LCA and economic valuation to determine environmental costs and benefits The environmental cost was combined with actual economic costs to produce a total social cost The waste management option with the lowest total social cost was considered to be the preferable option

Pira produced specific case studies using the model RDC extrapolated the findings of Pira’s case studies to cover all packaging in the EU Taking account of member states’ varying population densities, waste disposal options and packaging mixes, RDC calculated optimal recycling targets for each member state Pira’s use of Life Cycle CBA

CBA Methodology DETERMINE SCENARIOS MODEL INTERNAL COSTS MODEL EXTERNAL COSTS MODEL + VALUE GROSS EMPLOYMENT COMPILE TOTAL SOCIAL COSTS UNCERTAINTY/ SENSITIVITY ANALYSIS INTEPRETATION

“CBA attempts to quantify the total costs and total benefits of a given policy option in order to determine whether the policy is worth pursuing” CBA includes costs which are external to traditional direct monetary costs CBA is, in effect, trying to overcome the fact that traditional economics are imperfect CBA makes decision-making more apparent CBA Methodology

Inventory Classification/ Characterisation Economic Valuation CO 2 CFCs HCFCs CH4 HC NOx SO 2 Global warming in Kg of CO 2 equivalent Ozone layer depletion (in Kg of CFC11 equivalent) Photochemical oxidant formation (in Kg of C 2 H 4 equivalent) Acidification (in KG of SO 2 equivalent) LCACBA ‘Environmental score’ Economic Valuation of LCA: How it works

Lack of standardised methodology Imperfect raw data Wide range of valuation figures and environmental cost figures Complex real-world economics Member states (and regions within member states) differ greatly Any model of a complex reality is by definition imperfect - but the alternative is non-transparent, non-fact-based decision- making “The only perfect model of the universe is the universe itself” - Einstein Economic Valuation of LCA: Limitations

Life Cycle CBA: Results Recycled at a sensible rate, all types of PET bottle recycling are preferable to landfilling (in contrast, in the case of mixed plastics, disposal is probably better than recycling) Landfill Incineration Separate Kerbside Collection / Landfill Separate Kerbside Collection / Incineration Bring Scheme Bring Scheme / Incineration Total social cost Min recycling rate Max recycling rate PET Bottles

Life Cycle CBA: Sensitivity Analysis Sensitivity analysis reveals that the results are reversed if landfill costs are low (eg UK or accession countries) and economic valuation of PM10s (ie transport) is high Total social cost Landfill Incineration Separate Kerbside Collection / Landfill Separate Kerbside Collection / Incineration Bring Scheme Bring Scheme / Incineration Min recycling rate Max recycling rate PET Bottles

RDC used Pira’s case study results to generate EU optimal recycling rates Optimum Recycling Rates?

Current Pira-Ecolas Study The new study* revolves around two basic questions: has the Directive worked in sustainable development terms, and how can it be improved? The study looks at environmental, social and economic impacts of the Directive Pira is focusing on environmental aspects, Ecolas on economic aspects * “Study on the implementation of Directive 92/62/EC on packaging and packaging waste and options to strengthen prevention and re-use of packaging”

The type of questions Pira is working on... Has the Directive achieved a positive, neutral or negative effect on the environment? Is any environmental effect of the Directive significant in terms of the overall impacts of packaging and products? What has been the effect of member states' packaging prevention efforts? Have fees such as the DSD’s encouraged packaging minimisation? How could packaging prevention be encouraged? How could re-use of packaging be encouraged? Have the Essential Requirements been effective? How could a packaging environmental indicator work? Current Pira-Ecolas Study

The PEI concept was championed by Dorette Corbey MEP “We should not continue to encourage recycling as an end to itself. It is environmental impact that must be reduced” The aim was to measure packaging environmentally and so contribute to a Directive that encourages sustainability rather than recycling The PEI is based on streamlined LCA methodology Packaging Environmental Indicator (PEI)

The concept may be difficult in practice:  Packaging systems are as complex as the economic and material systems of the products contained  Environmental impact is difficult to measure even for relatively simple systems  In reality the most sustainable pack is that which most efficiently facilitates the sustainability of the product Recognising the conceptual and practical difficulties, Pira is developing three PEI systems for trialling by industry Packaging Environmental Indicator (PEI)

LCA is at the root of developments such as CBA and PEI All techniques share the same strengths and weaknesses LCA and its derivatives will never be an exact science and will inevitably arouse controversy when applied to regulation The attempt is worth making, however, because the alternative might be decision- making based on assumptions, emotive responses, hidden agendas or political expediency LCA, CBA, PEI: DOA?

Developing new policy tools is never easy or without controversy, but let us not lose sight of the fact that the ultimate aim is Sustainable Development in line with the EU’s Sixth Environmental Action Programme: “Environmental policy must be innovative in its approach and seek new ways of working” LCA and Sustainable Development