Hybrid LCC of Appliances with Different Energy Efficiency (10 pp)

Goal, Scope and Background This paper is concerned with a life cycle assessment (LCA) and life cycle costing (LCC) by the use of the waste input-output (WIO) quantity- and price model of air conditioners with different energy efficiency at the use phase (high-end, low-end and average models) that were available in Japan as of winter 2002. The functional unit is an air conditioner of the 2.5kW type that is used for 10 years, and then subjected to an end-of-life (EoL) process that is consistent with the Japanese law on the recycling of appliances. Methods This is the first simultaneous application of the WIO methodology to an LCA and LCC over the entire life-cycle of a product including the use phase, and represents a methodological extension (in the sense of considering the use phase) and integration (in the sense of a simultaneous application) of previous studies by us (Kondo and Nakamura, Int. J. LCA, 2004, Nakamura and Kondo, Ecol. Econ., 2005, in press). The main body of data is provided by the WIO table for the year 2000, an update of the previous table for 1995 that was used in the above WIO studies. Compared with the WIO table for 1995 that consisted of only about 80 industry sectors, the current one consists of about 400 industry sectors, and includes air conditioner as a separate sector. The data on the purchase price and efficiency of air conditioners indicate wide variations: the cheapest one (the low-end model) costs half of the most expensive one (the high-end model), but its efficiency is about half of the latter. Results and Discussion When the cost in the use and EoL phases is included, the low-end model becomes the most expensive one, and the high-end model with the highest purchase cost the least expensive. This reversal of the relative cost levels is attributed to the difference in the efficiency in the use phase. A sensitivity analysis indicates that a reduction of the electricity price in the use phase by about 40% does not alter the significant superiority of the high-end model over the low-end model. In spite of the largest amount of input in the production phase, the high-end model performs the best in terms of both global warming potential (GWP) and landfill, while the low-end model performs the worst. The use phase generates the largest amount of waste for landfill across the three models, the largest component of which is flyash generated from coal firing power plants. A possible internalization of externality in the form of carbon tax was found to work in favor of the high-end model. The cost advantage of the high-end model, however, is sensitive to the rate of discounting of future costs: discounting at 15% diminishes its advantage over the low-end model. Recommendation and Perspective The results indicate the effectiveness of the pricing based on the life cycle cost for achieving sustainability, that is, for promoting the shift of the demand away from appliances with low environmental performance to the one with higher environmental performance. Acceptance by society of pricing based on life cycle costing would require, among other things, an economy-wide standardization of the LCC concept (in a manner analogous to ISO-LCA) that can be used complementary to ISO-LCA.