96
5 Life Cycle Assessment of Chemical Products and Processes
• Does either of the foaming agents provide additional value for the insulation
(e.g., heat-insulating properties)?
• How do the costs compare among the production of the foaming agents and the
processes needed to use them? Would these then have a justifiable influence on
the selection?
5.8
Eco-efficiency
The first guiding principle of integrated development is the implementation of ecoefficiency, which is short for ecological efficiency. It is defined according to the
ISO 14045 standard (ISO, 2012) and is the ratio between the value of a product or
process and its environmental impact along its entire life cycle.
As introduced in the earlier parts of this chapter, the environmental impacts
can be calculated through the application of an LCA. The value, however, can be
assessed according to the ISO standard in terms of a provided function, monetary
amount, or even as an intangible contribution such as cultural or historical value. In
the context of this book, the focus will be placed on the monetary value generated,
and a fundamental approach for doing this is the calculation of the net present value.
5.8.1 Calculating Net Present Value
Economic accounting aims to determine the monetary value added along the life
cycle of a product or process using the market prices of the goods and services
involved. For this, a product’s value (expressed in terms of market volume and
market price) over a certain period is offset against the costs involved in bringing it
to the market (including both variable and fixed costs) (Brealey et al., 2017). This
difference is known as the net present value (NPV) and helps to take into account
the time value of money. It is the total present value of a time series of cash flows
covering the whole life cycle of a functional unit. Profit-seeking enterprises always
aim to maximize the NPV given the allocated amount of funds available for the
project.
The NPV is often calculated to also take into consideration costs associated with
potential future risks, economic inflation, and the opportunity cost lost by future
money not being able to accrue interest from being invested. This devaluing of future
revenues and expenses is called discounting, and it is necessary because having 1
dollar today is preferred and valued more than having 1 dollar in the future. The
exact amount to discount a future cash flow is subjective and is defined through
an applied discount rate. If, for example, the uncertainty of future revenues and
expenses is high, this can be reflected by applying a higher discount rate.
5 Life Cycle Assessment of Chemical Products and Processes
• Does either of the foaming agents provide additional value for the insulation
(e.g., heat-insulating properties)?
• How do the costs compare among the production of the foaming agents and the
processes needed to use them? Would these then have a justifiable influence on
the selection?
5.8
Eco-efficiency
The first guiding principle of integrated development is the implementation of ecoefficiency, which is short for ecological efficiency. It is defined according to the
ISO 14045 standard (ISO, 2012) and is the ratio between the value of a product or
process and its environmental impact along its entire life cycle.
As introduced in the earlier parts of this chapter, the environmental impacts
can be calculated through the application of an LCA. The value, however, can be
assessed according to the ISO standard in terms of a provided function, monetary
amount, or even as an intangible contribution such as cultural or historical value. In
the context of this book, the focus will be placed on the monetary value generated,
and a fundamental approach for doing this is the calculation of the net present value.
5.8.1 Calculating Net Present Value
Economic accounting aims to determine the monetary value added along the life
cycle of a product or process using the market prices of the goods and services
involved. For this, a product’s value (expressed in terms of market volume and
market price) over a certain period is offset against the costs involved in bringing it
to the market (including both variable and fixed costs) (Brealey et al., 2017). This
difference is known as the net present value (NPV) and helps to take into account
the time value of money. It is the total present value of a time series of cash flows
covering the whole life cycle of a functional unit. Profit-seeking enterprises always
aim to maximize the NPV given the allocated amount of funds available for the
project.
The NPV is often calculated to also take into consideration costs associated with
potential future risks, economic inflation, and the opportunity cost lost by future
money not being able to accrue interest from being invested. This devaluing of future
revenues and expenses is called discounting, and it is necessary because having 1
dollar today is preferred and valued more than having 1 dollar in the future. The
exact amount to discount a future cash flow is subjective and is defined through
an applied discount rate. If, for example, the uncertainty of future revenues and
expenses is high, this can be reflected by applying a higher discount rate.