EC project on Life Cycle Costing calculation tool

European Commission Environment Directorate-General Stefania Minestrini GPP AG meeting, Vienna 06-07 October 2015

Objectives

creating a tool for public authorities to facilitate the use of the LCC approach

Contributing towards a common methodology to be used in LCC

Life-Cycle Costing calculation tool

Life-Cycle Costing calculation tool

Electronic calculation tool for specific product

categories:

- Office IT Equipment

- Lighting (Indoor Lighting)

- White Goods

- Vending Machines

- Medical Electrical Equipment

LCC

Acquisition Maintenance End-

of-Life

0 Pre-acquisition costs Selling price

Post-acquisition costs

Environmental Externalities

ReCiPe method External

costs

Direct Costs

Life-Cycle Costing is a methodology where costs of a given asset are considered throughout its life-cycle (2014/24/EU - Art. 67)

Use

Costs imputed to environmental externalities linked to the product, service or works during its life-cycle, provided their monetary value can be determined and verified.

(2014/24/EU - Art. 68)

Indirect Costs

Direct costs are costs paid by the Public Authority along the life cycle of a product

- Purchasing cost

- Distribution costs

- Installation costs

- Costs of functioning during the use phase (e.g. energy,

water, consumables, etc.)

- Repair and maintenance costs

- Costs of regulating (fees or tariffs)

- Management costs

- Substitution costs

- Disposal, recycling costs

Limitations on direct costs In the application of LCC methodology some categories of costs are excluded, as they are not directly linked to the direct costs of the products, but to financial and administrative issues.

These categories include:

- Insurance costs (e.g.: mandatory insurances against risks of accidental damages for buildings or insurance to cover the risk of fire or thefts for cars);

- Taxes of ownership (e.g.: taxes that are due for the use of cars and other motor vehicles)

- Costs of money (e.g.: interest rates that are due for credit to consumption)

Limitations in the LCC calculation

• Inflation is disregarded in the tool.

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The relevant items of products life cycle (e.g. electricity consumption) are

firstly characterized regarding their resource/emission profile (using publicly

available life cycle inventory data), then converted into environmental impacts

applying a life cycle impact assessment method (ReCiPe). Then, the

environmental impacts are converted into externalities applying monetization

factors to the computed environmental impacts.

Externalities

ReCiPe METHOD • ReCiPe allows

calculating potential environmental impacts for all four environmental externalities;

• ReCiPe has been referenced in the ILCD Handbook as a recommended method for LCIA, rated in the majority of the accounted categories, proving itself as being largely applicable under several circumstances.

EXTERNALITY

IMPACT FACTORS FOR 1 kWh OF

ELECTRICITY

(EU 27 PRODUCTION MIX)

MONETARY VALUE FOR 1

kWh OF ELECTRICITY

(EU 27 PRODUCTION

MIX)

Climate change 0.023 €

Human Health 0.117 €

Ecosystems 1’323 €

Resources 0.016 €

Externalities calculations

IMPACT CATEGORY MONETIZATION

FACTOR UNIT

SOURCE

Climate change 40 €/tonCO2 Directive 2009-33-EC

Human Health 60000 $/DALY Heijungs, 2008

Ecosystems 1.75E+11 $/species.yr Heijungs, 2008

Resources 1 $/$ Heijungs, 2008

Externalities calculations

MANUFACTURING In order to consistently model the production phase, the tool user should always know the material composition of the assessed products (i.e. Bill of materials). Purchasers should ask information about the materials used for the production of the goods to bidders, who may not have such information available. The tool includes a rough estimate of externalities related to the manufacturing stage, in order to give the user a broader overview of the interactions between products and environment.

Externalities assumptions and limitations

MONETIZATION FACTOR: ECOSYSTEMS Due to the lack of reliable monetization factors for Ecosystems externalities, this item is not computed in the first version of the tool. Regarding the final development of the tool, a more robust monetization factor will be sought; otherwise the ecosystem impact category may be excluded from the calculations

LCC CALCULATION TOOL Calculation tool developed to meet the requirements of EU Directive 24/2014 regarding the implementation of life cycle perspective in public procurement. The tool has been developed in Ms-Office environment. Compatibility is guaranteed for Office versions from 2010 onwards.

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Timeline

Signature of the contract

Kick-off meeting

PAs questionnaire

Tool and user’s guide

concepts

Interim report

First version of the tool and user’s guide

Translation of the tool and user guide Testing

Second version of the tool and user’s guide

Final version of the tool and user’s guide

Final report

Testing phase

Pas will be involved in testing the tool over a period of 30 days (from 5th October till 5th of November). The PAs have been chosen according to the following criteria: • Interest from the organization and relevance for the PGs • Geographical representation (different countries and European areas) • Different administrative levels (local/regional/national) The PAs will receive, together with tool and user guide, a feedback template for reporting on: • Overall impressions and key results from the tool test • Any problems encountered • Suggestions for future updates

Contacts:

• stefania.minestrini@ec.europa.eu

•

GPP webpage: http://ec.europa.eu/environment/gpp

Thank you for your attention!