1.

INTRODUCTION

oikos PhD summer academy 2001

Environmental Management & Policy
and Related Aspects of Sustainability

ECONOMIC AND ENVIRONMENTAL OPTIMIZATION OF THE LIFE CYCLE OF PRODUCTS:

METHODOLOGY AND APPLICATIONS
Fausto Freire
Mechanical Engineering Department, University of Coimbra - Polo II
3030 Coimbra, PORTUGAL e-mail: fausto.freire@dem.uc.pt
Phone: +351 239 790739/00; Fax: +351 239 790701

The Industrial Ecology neologism was popularized by Frosch and Gallopoulos in the seminal
article Frosch and Gallopoulos (1989). It was proposed that the traditional model of industrial
activity in which individual manufacturing processes take in raw materials and generate
products to be sold plus waste to be disposed of should be transformed into a more integrated
model: an industrial ecosystem. In such a system the consumption of energy and materials is
optimized and waste generation is minimized. The industrial ecosystem would function as an
analogue of biological ecosystems. According to Frosch and Gallopoulos: an ideal industrial
ecosystem may never be attained in practice, but both manufacturers and consumers must
change their habits to approach it more closely if the industrialized world is to maintain its
standard of living and the developing nations are to raise theirs to a similar level without
adversely affecting the environment.
In the context of environmental problems, a number of tools for environmental analysis have
been developed in the past decades to study the flows of substances, materials and products
through the economic system and to assess the associated environmental impacts. Wellknown examples of these tools are life cycle assessment (LCA), material flows analysis
(MFA), substance flow analysis (SFA), environmental impact assessment (EIA), risk
assessment (RA), . The purpose of LCA is to study the environmental impacts of a product
or a service from the cradle to the grave . MFA is used to analyze the materials
throughput or the materials intensity of important sectors or large functional systems of the
national economy, and therefore concentrates on bulk mass flows. SFA is used to identify the
causes of specific environmental problems in the economy and find possibilities for amending
or preventing those problems, etc Many of these tools have different purposes and different
systems as their objects, however, in general, they do not include description of costs nor
mechanisms of economic analysis, Bouman et al. (2000).
1

Abstract
To reduce resource consumption and emissions while supplying the services required by
human society it is necessary to develop new approaches to the systematic use and re-use of
products, including the recovery of materials and energy, moving towards a more closed
material economy. The aim of this PhD research is the development of a decision-support
model Life Cycle Activity Analysis (LCAA) , integrating economic and environmental
considerations over the entire life cycle of products, in the context of industrial ecology,
environmental management and policy. LCAA combines mathematical programming formats
of economic Activity Analysis with the environmental Life Cycle Assessment methodology.
The main purpose is to provide a structured economic and environmental optimization
approach to model the entire supply chain of products, processes or services, with particular
emphasis on the alternative post-use processing alternatives. This research has been
applications-driven, meaning that relevance was attained by starting with a concrete
problem in the context of an actual application. The validation and generalization of the
methodology has been made through its application to several case studies namely bottled
water, scrap tires and plastic panels mounted on electronic equipment. Mathematical
programming models have been formulated and solved numerically to determine the optimal
chain configurations for each of the case studies. LCAA can help to select preferred
technologies for the manufacture, distribution and disposal of a product by analyzing and
solving What If Scenarios. For example, it can search out the lowest-cost alternatives which
meet the environmental targets defined. In this manner, it can be used to design and evaluate
alternative packages of environmental strategy or policy, including programs of action for
recycling and reuse of products, with the aim of identifying more sustainable practices for the
future.
Key words: activity analysis; case-studies, environmental management; environmental
systems analysis; industry ecology; life cycle assessment; optimization.

On the other hand, the shortcomings of traditional economic analysis have been widely
discussed, e.g. Georgescu-Roegen (1973); Ayres (1978); Heijungs (1997); Ayres (1998a,
1998b). In the economic theory of production all quantities are normally expressed in
monetary units. This traditional view of the economic process do not explicitly describes the
flows and transformation of materials and is unable to deal with unpriced inputs (and
outputs), violating the physical laws. It appears that an integration of economic and
environmental models is desirable and industrial ecology offers a powerful paradigm for this
integration.
The need to integrate physical, environmental and economic models has also been recognized
by a number of other authors and this has resulted in the development of various approaches.
For example, Leontief (1970); Perrings (1987); Ruth (1993); Heijungs (1997). Other
approaches also combine environmental analysis models and optimization methods to identify
optimum solutions, namely Azapagic and Clift (1995), Bloemhof-Ruwaard et al. (1996);
Leach et al. (1997); Azapagic and Clift (1999).
Jelinski et al. (1992) among others have suggested that Industrial Ecology may be approached
in two ways. The first is material-specific, that is, it selects a particular substance, material or
group of materials and analyses the ways in which it flows through the industrial systems and,
1

Note that the use of the term life cycle in the environmental literature is quite different from the concept of the life cycle
of a product used in the business literature (the cycle from the market introduction to the obsolescence).

eventually, accumulates in the environmental systems. Examples of this approach are MFA
and energy audits. The second type of Industrial Ecology analysis is one that is productspecific. A particular product (process or service) is analyzed in the ways in which its
different component materials flows may be modified or redirected in order to optimize the
product-environmental interaction. Such an analysis is particularly appropriated at the initial
design stage of a product, when decisions on alternative materials or processes are made, or
when a product reaches its end-of-life and decisions on alternative waste management
strategies must be made. An example of this type of approach is LCA, which is one of the
tools used in this research. LCA assesses the environmental aspects and potential impacts of a
product, process or service throughout its life cycle, from raw materials acquisition though
production, use and disposal, ISO 14040 (1997). This extended system boundary sets LCA
apart from other related methods as it provides a full picture of human interactions with the
environment. If coupled with economic analysis, LCA can provide a powerful decision-aid
tool for an integrated economic and environmental assessment of the material and product
supply chains. However, to facilitate this on the practical level it is necessary to develop the
appropriate approaches and tools that would help decision-makers and stakeholders to
understand: (a) what is the relation between demand of specific products, flows of materials
and environmental impacts (b) what changes are needed to reach specific objectives, such us
minimizing waste disposal or greenhouse gas emissions and (c) which trade-offs may occur
between these disparate aspects in different situations.
This paper is organized in five sections, including this introduction. Section 2 describes the
main purposes of this PhD research, including definition of the research questions and
approach. Section 3 gives an overall view of the LCAA methodology, particularly the
mathematical programming aspects. Section 4 describes the application of LCAA to three
case studies: mineral bottled water, scrap tires and plastic panels to be assembled into
photocopiers. Section 5 summarizes the main (preliminary) findings and contributions and
discusses limitations and further research.

2. RESEARCH OBJECTIVES AND QUESTIONS

The first section introduced the motivation and background for this PhD research. In this
section the main objectives of this research and the research questions to be investigated are
presented.
The overall purpose of this PhD research is the development of decision-support models,
integrating economic and environmental considerations, for the optimization of the entire life
cycle of products in the context of industrial ecology, environmental management and policy.
From the early stages of this research, life cycle thinking and LCA, in particular, were
recognized as important foundations for this research. An initial goal was, therefore, how to
combine environmental life cycle approaches with economic analysis and the preliminary
research and literature review focused on finding appropriate economic analysis theories,
complementary to LCA, which could contribute to the development of integrated decisionsupport models with the characteristics mentioned before. A suggestion from Prof. Sten Thore
(PhD advisor) to use Koopmans activity analysis (AA), prompt the investigation of (i) how to
combine mathematical programming formats of economic AA with the environmental LCA
methodology and (ii) how can this integrated optimization approach facilitate the
3

development of the kind of systems termed as an industrial ecology, providing tools to

support environmental management and decision-making. This combined approach was
termed Life Cycle Activity Analysis" (LCAA) , based on the designation of AA and LCA.
2

The main research question of this PhD can therefore be written as:
Can an integrated economic and environmental optimization approach combining
mathematical programming formats of economic activity analysis and the life cycle
assessment methodology be an appropriated framework for the development of
decision-support models for the optimization of the life cycle of products in the context
of industrial ecology, environmental management and policy?
Additional research questions have been formulated as follows:
What is the role of this extended-based optimization approach (LCAA) to facilitate the
development and assessment of the kind of systems termed as industrial ecology?
What type of problems can be addressed by LCAA?
What are the limitations of the LCAA approach?
How can the extended LCAA approach aid closing of material loops while satisfying
both environmental and economic objectives, and assessing the overall environmental
performance?
Can LCAA contribute to the conceptualization of Industrial Ecology, seen as a new
paradigm for the integration of environmental and economic performance?
Other research questions concerning the application of the methodology to the case studies
include:
What is the relation between demand of specific products, prices and costs, flows of
material and products, and environmental impacts, ...?
What changes in the flows of the material-product chain and operation levels of
activities and transportation are needed to reach specific objectives, such as
minimizing greenhouse gas emissions, energy use and/or waste disposed of.
To what extent are certain policy measures capable of influencing product-material
flows, the operation level of activities and, thus, environmental impacts?
Will any trade-off between flows of different materials and/or between environmental
impacts occur when introducing these policy measures?
Although the conceptual foundation for LCAA are evident, the research methodology
followed in this PhD has mainly been applications-driven, meaning that relevance was
attained by starting with concrete problems in the context of an actual application, Cooper and
McAllister (1999). In addition, the validation and generalization of the methodology has been
made through its application to several case studies, which are briefly described in section 4.

3. METHODOLOGY: LIFE CYCLE ACTIVITY ANALYSIS

This section presents the methodology. First, the antecedents of LCAA, classical Activity
Analysis adjoined to the environmental Life Cycle Assessment framework, are surveyed.

This designation was first suggested by Prof. Jonh Ehrenfeld in a meeting at the IST Technical University of Lisbon, in
1999 during his sabbatical at this University in Portugal.

Second, the main characteristics and advantages of LCAA are discussed. Third, the
mathematics is briefly described.
3.1.

Antecedents

Activity Analysis (AA) was developed by Koopmans in the early fifteens, Koopmans (1951,
1957). For this pioneering work, Koopmans received the 1975 Nobel Prize in economics
(shared with I. Kantorovich). However, the original formulation was not well suited for
numerical solution, since it assumed that there were as many commodities as activities, and
that the resulting system of equations had a non-singular solution. A major step was the
reformulation of AA as a Linear Programming (LP) problem, permitting any number of
activities and any number of commodities, Charnes and Cooper (1961).
In an Activity Analysis model, the possible techniques of production available to a firm, or to
the economy as a whole, are given by a finite list of elementary activities that can be used
simultaneously and at arbitrary non-negative levels. The resulting production possibility set is
a polyhedral cone. The activity analysis model, a generalization of the Leontief input/output
model, can be used to generate a large number of distinct linear programs, depending on the
objective function to be chosen and on the specific set of factor endowments.
Activity Analysis can be viewed as a tool of partial economic analysis modeling for the
representation of an industry or a sector of the economy, providing a mathematical format
suitable for the representation of an entire vertical production chain, Thore (1991). More
recently, Heijungs (1996, 1997) recognized the conceptual similarities between LCA and
classical Activity Analysis (AA) and observed that Life Cycle Inventory is an extension of
AA, both being commodity-by-industry analysis, generally seen as superior to other forms
of inter-industry analysis, Heijungs (1996), however no connection between mathematical
programming and LCA was made. Thus, a major purpose of LCAA discussed here is to
highlight how this connection can be established, using extended mathematical programming
formats of AA for integrated economic and environmental analysis of the life cycle of
products.
For example, whenever products can be manufactured in alternative ways, distributed through
alternative marketing channels, reused or recovered, there exists scope for choice and for
controlling the environmental impacts. By combining the LCA approach with mathematical
programming techniques, it is possible to represent these options explicitly along the whole
supply chain and to solve for optimal economic (e.g. production levels or profit) and
environmental performance (e.g. environmental impacts and allocation of resources).
The classical formulation of AA distinguishes three classes of goods: primary goods (natural
resources, materials or labor), intermediate goods (outputs which serve as inputs into
subsequent activities) and final goods (outputs). LCAA extends the concept of linear activities
to embrace mass and energy fluxes over the entire life cycle of products. In particular, the
proposed LCAA model includes one additional category: environmental goods,
representing primary resources (material or energy drawn directly from the environment) and
emissions of pollutants and the disposal of waste (discarded into the environment without
subsequent human transformation).

such as global warming, ozone depletion etc. The purpose of such aggregation is two-fold.
Firstly, it interprets the environmental burdens included in the output table in terms of
environmental problems or hazards. Secondly, by aggregating a large set of data in to a
smaller number of impact categories it simplifies the decision-making process.
LCA originates from energy analysis studies, first published in the 1970s, which considered
only energy consumption over the life cycle of a product or a process, e.g. Boustead (1972)
and Boustead and Hancock (1979). Over the last decade LCA has received wider attention
and intensive methodological development leading to the publication of several documents
and guides. Examples include an LCA guide published by the CML, Heijungs et al. (1992),
and the SETAC Code of Practice, Consoli et al. (1993). More recently, the International
Organisation for Standardisation (ISO) has adopted environmental management standards for
LCA, ISO 14040 (1997); ISO 14041 (1998); ISO 14042 (1999); ISO 14043 (2000).
In a recent guide, updating the previous guidelines, Guine et al. (2001), LCA is defined as
a tool for the analysis of the environmental burden of a product at all stages in their life cycle
from the extraction of resources, through the production of materials, products parts and the
product itself and the use of the product to the management after it is discarded, either by
reuse, recycling or final disposal. The LCA methodology has four components: (1) goal
definition and scoping, (2) inventory analysis (also, life cycle inventory), (3) impact
assessment and (4) interpretation. A full life cycle assessment includes each of these four
components. Detailed information about the LCA methodology can be found, for example, in
the previously mentioned references and thus the text below focus on some of the concepts
with more relevance for the development of the LCAA methodology. For example, the
concepts of "foreground" and "background" proposed within the environmental systems
analysis theory are very useful since they help to distinguish between unit processes of direct
interest in the study, and other operations with which they exchange materials and energy,
Clift et al. (1999, 2000). The foreground may be defined as the endogenous part of the
production chain, which includes the set of processes whose selection or mode of operation is
affected directly by decisions of the study. The background denotes the exogenous parts of the
production chain, comprising all other processes that interact directly with the foreground
system, usually by supplying material or energy to the foreground or receiving material and
energy from it. These concepts are illustrated in Figure 1.
Adopting these concepts and terminology, a complete life cycle approach must pursue the
production chains both upstream (all the way to their "cradle") and downstream (to their
"grave"), by explicitly encompassing the indirect effects associated with the supply of goods
together with direct effects of the core system being modeled. Section 3.2 describes how the
LCAA approach is formulated to account not only for the environmental burdens of processes
in the foreground but also for impacts in the background. Thus, the total environmental
impacts are calculated over both the endogenous and the exogenous part of the life cycle. The
foreground and background concepts are also useful in setting goals and targets which can be
attached to both variables in the foreground and in the background.

In the LCA terminology, the environmental goods are known as environmental burdens and
they can be further aggregated into categories of resource usage and environmental impacts,
5

Materials/energy
recovered
(avoided burdens)

Background
System

Indirect
burdens

Direct
burdens

Products,
Materials,
Energy

Using LCA terminology, this is equivalent to Life Cycle Impact Assessment (LCIA),
ISO 14040 (1997). However, unlike in LCA, there are mathematical degrees of
freedom present in the LCAA model, because vectors of individual environmental
burdens associated with alternative activities may translate into the same aggregated
impacts. The optimizing format makes it therefore possible to determine the optimal
levels of individual environmental burdens (and associated vector of activity levels)
that are commensurate with a given set of goals in terms of environmental impact
categories.
LCAA is a numerical technique, requiring the use of advanced mathematical
programming software. The software used in this work is GAMS (General Algebraic
Modeling Software), Brooke et al. (1998).

Foreground System
Primary resources

Environment

Figure 1. Foreground and background systems

Varying the numerical assumptions of the model (and varying the goals or the priorities
parametrically), LCAA can be used to generate a set of scenarios to be presented to the
policy-maker. In this manner, a series of "what if?" questions can be addressed and answered.
3.3.

3.2.

Life Cycle Activity Analysis

LCAA is a new tool for the mapping of hierarchical production and recovery chains, their
impact on the environment, and for a holistic evaluation of new technologies, environmental
strategies or policies. LCAA involves three successive stages of analysis: i) a description of
all participating activities (processing, transport, use, recovery) as a good travels from its
"cradle" to its "grave", including the inventory of ancillary materials and energy supplied to
each activity, economic costs and environmental burdens; ii) the formulation and numerical
solution of a linear or nonlinear mathematical programming model and iii) the evaluation of a
set of environmental scenarios of interest to decision-makers or stake-holders.
Furthermore, LCAA considers alternative methods of production, distribution, reuse and
recovery. It provides a general optimization framework for the modeling of reuse and
recovery of products, leading to loops in the life-cycle chain. It permits materials and energy
to be recovered both inside the foreground (closed-loop) and between the foreground and the
background (open-loop). In addition, the recovery of materials or energy in the foreground
may displace activities in the background system, leading to the avoidance of environmental
burdens that would otherwise have been generated. This is known as the avoided burden
approach [e.g. Clift and Doig (1996)] and that can also be expressed explicitly within LCAA.

Mathematical Programming Formats

The analysis of the mathematical programming formats that can be formulated within the
LCCA framework is presented below. Depending of the type of applications and problems to
be addressed, different types of models can be formulated. For example, many alternative
objective functions can be specified (or even a multi-objective approach) using linear and
non-linear programming techniques. Two simplified versions are presented as illustrative
examples of the type of programming models that can be formulated. The first version
considers only closed loops while the second one includes the possibility of open-loops
(recovery from the foreground to the background).
The LCAA model uses an input-output format. A detailed notation list can be found at the end
of the paper. A basic mathematical format of LCAA can be written as the following linear
program:
min
subject to

cx + qw
-APx + w
(-AI + BI)x
BFx
(AE BE)x Dw
x, w

0
0
d
-g
0

(1)

The LCAA approach offers the following advantages:

LCAA explicitly recognizes the possibility of alternative ways of production (e.g.
using raw or recycled materials), alternative distribution channels, and alternative
reuse or recovery processes. In other words, there are mathematical degrees of
freedom present in the model format, and the purpose of the programming model is to
determine the optimal choices at each stage of the logistics chain.
LCAA incorporates advanced techniques for representing environmental goals in the
model, in the so-called Goal Programming. These goals do not need to be absolute
targets but can be a set of ordinal priorities, laid down by decision- or policy-makers.
Goals can also be ordered in hierarchies, with sub-goals in several layers. In this
manner, LCAA allows for realistic modeling of the goal-based process.
Through the LCA approach, individual environmental burdens are brought together
under environmental impact categories, such as global warming, acidification, etc.

where cx represents the total costs of operating the activities x and qw is the total cost of
primary goods. A and B are matrices of input and output coefficients, respectively; w
represents a column vector of supply levels of primary goods, such as material and energy
from the background system. Superscripts P, I, F and E represent primary, intermediate, final
and environmental goods, respectively. Primary goods are inputs of products, material and
energy produced in the background. Intermediate goods are outputs that serve as inputs into
subsequent activities, either in the foreground or in the background. Final goods are the
functional outputs delivered by the distributed and purchased products, the production of
which is the objective of the economic system under study. Environmental goods or
interventions are flows of materials or energy drawn from or discarded into the environment
without subsequent human transformation. By convention, the input coefficients (A-

coefficients) have a minus sign and the output coefficients (B-coefficients) are assigned a
positive sign. Consequently, matrices A and B become partitioned into:
A = (-AP, -AI, 0, -AE)
B = (0, BI, BF, BE)

(2)

As discussed in the previous section, the model adopts the concept of the foreground and
background systems (see Figure 1). The foreground is modeled in some explicit detail: the
production activities themselves, and the conversion of intermediate goods into final goods,
i.e. the set of processes whose selection or level of operation can be affected directly by
decisions in the study. The background comprises the exogenous flows of the model, i.e. the
supplies of primary goods.
The environmental goods or interventions arising from the foreground (i.e. from the
operations which are being modeled directly) are termed direct burdens. They include the
direct emissions from operating the activities (e.g. combustion, chemical reactions, thermal
treatments, long-term leachate emissions from landfill etc.) and from the transportation of
intermediate goods. The resource usage and emissions arising from the background activities
are termed indirect burdens; they are caused by the changes in the demand of products,
materials and energy in the foreground. The indirect burdens can be described by generic
industry data, obtainable from commercial or public life cycle inventory databases. Direct
burdens on the other hand are process-specific and must be sourced from the manufacturers in
the foreground.
In this way, the model calculates the total accumulated environmental burdens over the entire
life cycle of the product, including the indirect environmental burdens of primary goods
arising in the background. Thus, the total environmental burdens arising over the life cycle of
the products are equal to the sum of the foreground (direct) burdens and the background
(indirect) burdens, that is (-AE + BE)x + Dw, where Dw is a vector of environmental effects
arising from the background.
The model (1) minimizes total costs, which comprise the costs of operating activities and of
primary goods. For present purposes, it is assumed that the prices of all primary goods are
known and constant.
The crucial feature of formulation (1) is the constraint (AE BE)x Dw -g, which requires
the environmental burdens (AE BE)x Dw not to exceed a vector of environmental goals g
set for example by a policy- or decision-maker.
The second version of an LCCA mathematic programming format involves expanding the
possibilities for reuse and/or recovery of products. As mentioned before, such loops in the life
cycle chain can take two forms: recovery entirely in the foreground (closed loop) and
recovery from the foreground to the background (open loop). Materials and energy recovered
in the foreground, which are also inputs to the activities in the foreground (closed loops), may
lead to the avoidance of environmental burdens. This is the case when burdens associated
with foreground activities that are displaced by the recovery processes are higher than the
burdens of the recovery itself. The opposite is also possible: material loops may sometimes
lead to higher environmental burdens, i.e. a worse environmental performance overall. This
can happen when the recovery of used products and materials by itself imposes considerable
burdens.
9

A product that is recovered and exchanged with the background system will be treated as an
intermediate good. The usual assumption is that the recovery of materials and/or energy in the
foreground does not affect the demand for goods and services in the background (except for
materials and energy supplied to the foreground activities), Clift et al. (2000). Therefore, the
market balance for intermediate goods which was defined in (1) as (- AI + BI)x = 0 has to be
amended to (- AI + BI)x y = 0, where y is a column vector of unknown levels of recovery
of intermediate goods. Zero entries indicate recovery entirely in the foreground, positive
entries indicate recovery supplied from the foreground to background.
Adopting these assumptions, the total environmental burdens are then equal to the sum of the
foreground (direct) burdens and the background (indirect) burdens minus the avoided
burdens, that is: (BE AE) x + Dw Dy.
Regarding economic considerations, when recovery or reuse occurs entirely in the foreground,
no additional net revenues or costs accrue, since these economic flows have already been
taken into account in the activity analysis format. However, when intermediate goods are
recovered back to the background and thus exported to the exogenous part of the model, it
is necessary to account for the net revenue (or net cost) py, collected in the foreground, where
p is a vector of unit prices of recovered goods. Here, p is assumed to be known and to
represent average prices of recovered goods. (Alternatively, marginal prices or price sensitive
functions could be used, describing the price elasticity of recovered goods. The latter
extension would cause the model to change from a linear to non-linear one.) Combining these
changes to accommodate recovery of goods, the programming format (2) becomes:
min
subject to

cx + qw py

-APx + w
=
(-AI + BI)x y
BFx

(AE BE)x Dw + Dy
x, y, w

0
0
d
-g
0

(3)

Programming format (3) represents the extended LCAA format, accounting for the possibility
of closed-loops. Further extensions to these two basic model are possible. For example,
transportation and shipping of goods between various locations may be accounted for in all
parts of the supply chain. The basic programming format still applies, treating each
transportation link as a separate activity, with its own inputs and outputs, Freire et al. (2001).
Moreover, if the time-profile of activities is important, the model may be developed into a
multi-period one. All variables then need to be dated, and the market balances in each time
period need to be defined explicitly.
Environmental Life Cycle Impact Assessment
The BE and -AE matrices constitute an inventory table, summing up the outflows and
subtracting the inflows of environmental goods associated with the economic activities. In
LCA, this is part of Inventory Analysis.
Flows of substances are recognized as environmental problems only when they pose problems
to the environment and society. Thus, there is an intrinsic value-bound aspect to the definition
of an environmental problem, Heijungs (1997). To deal with this, it is necessary to establish
10

scientific relationships between pollutants and a set of environmental impact categories, such
as the greenhouse effect, acidification or ozone layer depletion. Similarly, there is a
relationship between resource extraction and various depletion problems. Hence, the impact
categories can be defined in terms of damage to the environment by pollutants in air, water or
soil and by the depletion of available natural resources. In LCA terminology, aggregation of
environmental burdens into impact categories is carried out in the Impact Assessment phase.
As described by the environmental-goal constraint in the extended program (3), the vector of
environmental burdens, E(i), is equal to the sum of all direct and indirect burdens minus the
avoided burdens:
E(i) = (BE AE)x + Dw Dy
where i represents individual environmental burdens. The individual burdens can be
aggregated into a set of environmental impact categories according to the expression:
I(j) = F(j,i) . E(i)
where I(j) is a vector of environmental impact categories j and F(j,i) is a matrix of relative
impact coefficients (for example, the global warming impact coefficients of greenhouse gases
are expressed relative to CO2, whose coefficient is defined as unity).
The environmental goal-oriented expression may then be reformulated into:
F(j,i) . [(AE BE)x Dw + Dy] -g'
where g' is a vector of goals defined directly in terms of environmental impact categories:
g' = F(j,i) . g
More advanced formulations are also possible by treating the vector of individual
environmental goals g as an unknown rather than as a given parameter, as proposed in Freire
et al. (2001)). This means searching out an optimal combination of individual goals i.e. an
optimal combination of individual environmental burdens possibly trading-off one
individual burden against another while still satisfying the goals defined for the impact
categories. The programming formulation (4) then becomes:
min
subject to

cx + qw py

-APx + w
=
(-AI + BI)x y

BFx
(AE BE)x Dw + Dy + g
F(j,i) g

x, y, w, g

0
0
d

g'
0

(4)

which is a linear program with the unknowns x, y, w and g.

It is also possible to define the optimization problems discussed above in a dual programming
format. The dual program and a detailed discussion of the meaning of the dual variables can
be found in Freire et al. (2002).
11

4. CASE STUDIES
This section presents the application of the LCAA methodology to three case studies: bottled
water, scrap tires and plastic panels mounted on electronic equipment. The purpose is to
illustrate the potential of the methodology, the type of problems to be addressed and its
relevance to environmental policy in the context of industrial ecology. Numerical results and
discussions are not included and can be found in the reference provided for each case-study.
4.1.

The Portuguese Bottled Water Industry: Reuse and Recycling of Bottles

The bottled water market can conveniently be divided into two sectors: "horeca" (hotels,
restaurants and cafes) and take-home (supermarkets, shops, etc.) The former represents places
where the water is consumed on the premises. The latter includes stores where the consumer
takes the bottles home. The distinction is made in accordance with Portuguese packaging law
366-A/97. It is important because different recovery targets are specified for each of these
markets.
Bottled water is sold in units of 0.25, 1.5 and 5 liters, made of glass, PVC (polyvinyl chloride)
or PET (polyethylene terephthalate). In our study, attention is focused in the glass bottles
alone, as these are the only bottles being reused. In addition, glass is the only material for
which important recycling rates are achieved in Portugal. Collection of used glass is practiced
over the entire country.
Water bottling is carried in locations immediately adjacent to the springs. The bottling
company buys empty bottles from a glass mill or utilizes a cleaned used bottle. The glass mill,
in its turn, manufactures bottles from raw materials (the main raw material is silicon sand)
and/or from cullet (collected crushed glass). Glass mills have collected cullet for recycling in
Portugal since 1983, without governmental intervention: the main incentive is the reduction of
production costs (mainly energy costs) that occurs when the raw materials are replaced by
cullet.
The distribution of bottles from the springs to the market is typically handled by the bottling
company itself, using road transport (25-ton and 10-ton trucks) and regional warehouses. The
great majority of the springs are located in the northern region of the country; most glass mills
are located in the center. On average, a truck has to cover a distance of about 300km from the
mill to the spring. There are in Portugal about 20 independent companies marketing bottled
water under more than twenty-six different brands. Their annual sales volume is about 600
millions liters (1997 data). The six largest companies (nine brands) have a market share of
more than 80%.
Packaging has motivated various disputes between environmentalists and industry. The short
life cycle associated with packaging motivates environmentalists to claim that packaging
should be reduced at the source to its smallest proportions and reuse should be promoted.
Industry argues that hygiene, protection, convenience, also have their rights and that the
weight of one-way packaging has been dramatically reduced.

Results and details about this case-study can be found in Freire et al. (2001)

12

Responding to this dispute, European Commission proposed some Directives with the
objective of harmonized managing of packaging and its resulting waste, while ensuring a high
level of environmental quality.
The directive covers all types of packaging in the European Union industrial, commercial,
office, shop "or any other level". Within six and half years of adoption of the directive (five
from implementation by national law), the main recovery objectives are:
50-65% of packaging, by weight, must be recovered where recovery includes any
activity which confers economic value on the waste (i.e. recycling, re-use, energy
recovery),
25-45% of packaging by weight must be recycled, with a minimum of 15% of each
material (paper, aluminum, steel, plastics) being recycled.
These targets are relaxed for Greece, Ireland and Portugal who must attain at least 25%
recovery by the five-year deadline, or achieve the targets for the rest of EU by 2005.
The directive is clear in indicating that re-use and recycling are "preferable in terms of
environmental impact" to other forms of recovery and to disposal. This hints at the so-called
"waste hierarchy" which has gained credence in European policy discussions on waste
management. The hierarchy, from the best to worst, is source reduction, re-use, recycling,
composting, energy recovery, and landfill.
The LCCA programming format (1) presented in Section 3 is applied to provide a sample
model of the manufacture, reuse and recycling of glass bottles used for mineral water in
Portugal. A simplified flow chart is presented in Figure 2.

Region A
Glass mills

Region D
Horeca

Region B
Bottling plants
3

Region F
Cullet collection
8

7
Region C
Warehouses

Region G
Returnable bottles

cafes, see Section 2) and the take-home market. Reading the diagram from left to right, the
following regions are recognized in the logistics flow:
Region #A: Glass mills (manufacturing glass bottles from raw materials and from
cullet glass),
Region #B: Bottling plants (filling and cleaning new and returnable glass bottles),
Region #C: Warehouses,
Region #D: "Horeca" market,
Region #E: Take-home market
Region #F: Cullet collection plants,
Region #G: Returnable bottles plants,
Region #H: Empty bottles collected and disposed of as waste in landfill.
The arrows show the direction of the logistics flow. Note the loops feeding flow back from
regions #F (cullet) and #G (used bottles) to regions #A and #B (stippled lines in the diagram).
Stocks of materials are not featured in the example. Ten production activities were
considered. Notice that some activities are carried out at more than one node see activity
#7, for example.
Activity #1: Making glass from raw materials,
Activity #2: Making glass from glass cullet,
Activity #3: Manufacturing empty bottles (from bulk glass),
Activity #4: Cleaning and filling bottles,
Activity #5: Cleaning and filling returned glass bottles,
Activity #6: Distribution (and warehousing) of bottles,
Activity #7: Consumption of mineral water,
Activity #8: Collection and filtration of glass cullet,
Activity #9: Collection of returnable bottles,
Activity #10: Landfill disposition of glass,
The transportation of intermediate goods is represented in Figure 2 by links (arrows)
connecting several of the regions. The optimization of the logistics flow features a series of
alternatives activities, for example: The manufacturing of a bottle can be based on raw
materials or on glass cullet. A bottle to be filled can be a freshly made or a cleaned used
bottle. A used bottle can be recycled back to the bottle manufacturer, it can be returned back
to the bottle filler for reuse, or it can be disposed of in the landfill.

5
Region E
Take-home
7

Region H
waste collection
Landfill

Assuming that all firms minimize costs and that all markets clear, the model is solved for all
the unknowns: the levels of operation of all production and transportation activities, and the
supplies of all primary goods.

10

4.2.

Figure 2. Flowchart illustrating the logistics of the production

and distribution of mineral water in glass bottles
The figure illustrates both the vertical dimension of the industry the production chain from
the glass mills to consumption and landfills, including the recovery of glass bottles (reusing
and recycling) and the spatial dimension. No regional breakdown of production is shown,
but the overall market is broken down into the two sectors: horeca (hotels, restaurants and
13

End-of-Life Strategies for Scrap Tires

The motivations for this case-study derives from the current work at the European Union
level, where a working group was set, with the purpose of developing a strategic proposal for
management of the used tire flux. According to their conclusions, there are a few goals that
must be achieved in the near future:

Selective recover must be implemented to 100% of the total production;

Results and details about this case-study can be found in Freire et al. (2000)

14

Prevention strategies must be implemented in a way that the waste flux should equal
the production levels of 1990;
Retreading must be the end of life for, at least, 25% of the produced used tires;
For energy recover should be sent, at least, 65% of the used tires;
Landfill deposition must be forbidden.

Therefore, one of the goals of this paper consists on the identification of the recovery
processes alternative to landfill, taking into consideration the Portuguese industrial capacity
for each technology. As a consequence, two scenarios are analyzed, the conventional
situation, corresponding to 1995, and a prospective scenario for 2000, considering the
prohibition of landfilling. Here the analysis of the environmental impacts is focused on the
energy use, over the tire life cycle.
Tires are among the industrial products with the largest generation of solid waste. In 1998,
the weight of used tires disposed of in Portugal was more than 25 thousand tons (2.5 kg/year
per capita). Used tires are can have several destinations and a significant part of them can be
reused after being retreaded, gaining similar quality standards as new ones. Others
reprocessing include several technological possibilities for material recycling and energy
recovering by using tires as fuels.
According to Snyder (1998), the decline of the rubber reclaiming industry is the major cause
of today's scrap tire problem. The reasons for this decline included (i) the advantages of
synthetic rubber supplanting natural rubber and its unstable market availability (ii), modern
plastics have replaced reclaimed rubber in many large-volume uses and many articles that
could also use reclaim are no longer manufactured from rubber today, (iii) the level use of
reclaimed rubber in tire manufacture has been dramatically reduced. Therefore, the
corresponding markets for reclaim have disappeared.
In this model, economy is represented as a system, including activities and physical and
monetary flows between these activities. The referred activities represent the processes
necessary to provide the product being analyzed and cover the entire product life cycle. In
specific nodes of the material-product chain there are alternative activities capable of
supplying and demanding the same intermediate product.
The model calculates the least-cost system configuration. Process activities, financial flows
and material-product flows characterize the system configuration. Special attention is given
to include alternative end-of-life recovery technologies (reusing, recycling,...), which
contribute to close loops in the production chain, so that downstream outputs are returned as
inputs upstream. A simplified flow chart is presented in Figure 3. The figure illustrates the
vertical dimension of the product-material chain.
The production activities include the manufacture of tire's raw materials: steel, textile and
compound rubber with the possibility of using a fraction of recycled rubber and the
manufacture of new and retreaded tires. Furthermore, in order to follow the environmental
effects of a manufactured product over its entire life, using tires is not considered as a final
and ultimate state. Instead, the life cycle is traced to include the possible recovery activities,
namely recycling of tire's constituent materials, energy recovery (co-incineration in cement
plants), tire retreading and landfilling.

15

#5
6
5

#2
2
1
#1

NR

steel

Tire
manufacture

16

10

#14

#8

4
CR

#6

15
#10

scrap
tires

14

3
CR

Rejected
tires

11
#9

#13
tire chips

12

#7
Retreaded

#3

energy

Use

textile
#4

SBR

Disposal by landfill,
energy recovery and
material recycling

Tires from
eol vehicles

Raw-materials
manufacture

#12
steel

13
#11

buffings

textile
crumb rubber

crumb rubber

Figure 3. Flowchart illustrating the logistics of the production, distribution

and recovery of tires
Reading the diagram from left to right, the following sixteen activities can be recognized in
the logistics flow:
1. Extraction and manufacture of natural rubber (NR)
2. Manufacture of synthetic rubber: Styrene-butadiene rubber (SBR)
3. Making compound rubber with NR, SBR and crumb rubber (recycled)
4. Making compound rubber with NR and SBR
5. Manufacture of textile (crayon cords)
6. Manufacture of steel cords
7. Tire manufacture
8. Using new tires (including collection of used tires)
9. Using retreaded tires (including collection)
10. Collection of tires from end-of-life vehicles
11. Retreading tires
12. Collection of scrap tires
13. Recycling: Tire chips production
14. Recycling: crumb rubber, textile and steel production
15. Co-incineration of scrap tires in cement plants
16. Landfill disposition
The spatial dimension is also considered; fourteen locations are defined in Figure 3 (stippled
rectangles with cardinal numbers). No regional breakdown of the production activities is
considered. Stocks of materials are not featured in the example.
The arrows show the direction of the logistics flow. Note the loops feeding flow back
(stippled lines in the diagram) from activity 11 (retreading tires) to 8 and from 13 (recycling)
to 3. It should be noticed that about two casings in each three inspected are not suitable for
retreading; these are called rejected tires (see figure 3). In addition, those tires that are
accepted have the old tread removed. The rubber particles that are removed are called
buffings (rubber), being sold to the rubber industry. Buffing a passenger car tire generates
16

about 0.8kg of ground rubber, Ferrer (1997). Rejected tires are collected and disposed of
together with worn-out tires not considered for retreading.
The optimization of the logistics flow features a series of alternative activities, for example:
the manufacturing of compound rubber can be based only on natural and synthetic rubber or
also include a fraction of recycled crumb rubber. A tire can be a new one or a retreaded one.
A worn-out tire can be used as fuel in cement plants, disposed of as waste in landfill, chopped
in tire chips or granulated to permit the further use of its recycled materials.
Assuming that all firms minimize costs and that all markets clear, the model is solved for all
the unknowns. The levels of operation of all production and transportation activities, the
supplies of all primary goods and the production of intermediate and final products to be sold
in commercial markets not included in the tire material-product chain studied
4.3.

Plastic Panels Mounted on Electronic Equipment

The purpose of this case study is to optimize environmental and economic burdens of the endof-life options for plastic panels used in electrical and electronic products. The particular
plastic component to be investigated is the rear panel used on photocopying machines.
Plastics used in the production of panels are engineering grades of Polycarbonate (PC) and
Acrylonitrile-Butadiene-Styrene (ABS). The panels are mainly used for aesthetical purposes,
giving the photocopier a final shape. Similar panels can be found on a number of other office
equipment, such as computers, keyboards, telephones and fax machines. Although robust,
plastic panels deteriorate during usage. Current volumes of reprocessed panels are high. In
addition to the current practice of panel reuse by refurbishment, other possible end-of-life
management options for plastic panels include:
mechanical and chemical recycling,
incineration (with or without energy recovery), and
disposal to landfill.
The reuse with refurbishment option involves removal of the panels from the equipment
followed by the repair process where scratches and other repairable damage are filled and
sanded. The panels are then re-sprayed usually using water-based paints. There are limits,
however, to the extent to which panels can be remanufactured. Technological change of the
equipment, high aesthetic standards, brand-specific components, logistics complexity are all
reasons why a new panel may be preferred to a refurbished panel. In addition, a refurbished
panel can only be refurbished once, due to problems with satisfactory re-painting of the
refurbished panels.
Mechanical recycling breaks down the plastic material mechanically to yield granulate. The
granulate is sometimes called "recyclate" and can be easily mixed with virgin material.
Recyclate can be further reprocessed chemically through pyrolysis to obtain hydrocarbons
which could be processed further and used in a closed loop to produce resin granulate, or in
open loops in other processes displacing the use of virgin raw materials. Only panels with no
surface treatment can currently be mechanically recycled. This means that refurbished panels
cannot be recycled and implies that the panels can only be used once if the plastic is going to
be reprocessed.
5

Preliminary results and details about this case-study can be found in Freire et al. (2002)

17

Of the end-of life options available, it is not immediately obvious which is preferable, as the
choice depends on a number of technical, environmental and economic factors. This case
study aims to analyze these options and all relevant decision-making criteria to identify the
optimum solutions, and thus asks:
is it preferable to recycle the panels and use the recyclate to make new panels?, or
is it better to remanufacture the panels after the first use by painting (and so eliminate
the possibility of recycling the panels for future use)?
The supply chain and the reverse logistics for the plastic panels are illustrated in Figure 4. The
figure shows the following stages in the life cycle of panels:
the production chain producing the virgin polymer granulate,
the manufacture of panels,
the use phase (with photocopiers), and
several end-of-life alternatives: reuse, mechanical and chemical recycling, incineration
and landfill.
#2

#1
A. Virgin resin

I. Recovered
hydrocarbons

K. Landfilled
plastic

J. Plastic
incineration

#3
#14
B. Compound

#15,
#16

H. Recyclate

#17,
#18

#4
#5
C. New panel

#13
#6
D. Panels
assembled
on copier

G. Refurbished
panel

E. Worn
panels

#8,
#9

F. Panels
dismantled

#10,
#11

#7
#12

Figure 4. Flowchart illustrating the logistics of the production, distribution

and recovery of photocopier plastic panels
The supply chain network in Figure 4 consists of nodes, loops and direct links. The nodes
signify states of the product flow. The following nodes exist:
Node A: Virgin resin (a blend of PC and ABS)
Node B: Compounded polymers
Node C: New panels
18

Node D:
Node E:
Node F:
Node G:
Node H:
Node I:

Panels assembled on photocopiers ready for use

Worn panels on photocopiers after use
Photocopiers disassembled and used panels dismantled
Refurbished panels
Recycled granulate ("recyclate")
Recovered hydrocarbons

Node J:
Node K:

Plastic panels incineration

Landfilled panels

The following loops exist: refurbishing of used panels goes from node F to node D (via node
G), and the recycling of hydrocarbons and granulate goes from node F to nodes A (via I) and
B (via H). These feedbacks are indicated by dotted lines in the diagram.
Optimization of the flows shown in Figure 4 requires choices to be made between a series of
alternative activities. For example, both raw materials (hydrocarbons from petroleum or
natural gas) or recycled feedstock (obtained from the pyrolysis of recyclate) can be used to
produce virgin resin. The PC/ABS compound can both be produced by adding additives
(mainly flame retardants) to virgin granulate (activity x3) or to a mixture of virgin material
and recyclate (activity x4). A panel to be assembled onto a photocopier machine can be a new
or a refurbished panel. Used (new) panels can be refurbished, recycled, incinerated or sent to
landfill. Used refurbished panels can only be disposed of as waste in landfills or incinerated.

5. CONCLUSIONS
5.1.

Main Preliminary Findings

The present work has demonstrated the potential of a novel tool Life Cycle Activity
Analysis for an integrated economic and environmental analysis of the material-product
chains associated with the life cycle of products. This tool combines the advantages of the
Life Cycle Assessment (LCA) methodology, that tracks the environmental consequences of a
product, process or service from "cradle" (resource origin) to "grave" (final disposal), with the
advantages of using mathematical programming formats of economic Activity Analysis. The
methodology allows for the analysis of What if? Scenarios. In this manner, it can be used to
design and evaluate alternative packages of environmental strategy or policy, including
programs of action for recycling and reuse of products, with the aim of identifying more
sustainable practices for the future.
To explain the relationship between LCAA and conventional LCA, it can be pointed out that
Life Cycle Assessment is a special (mathematically: a degenerate) case of LCAA. Both
techniques track the environmental impacts of a product from the original use of natural
resources to the final disposal of the used product. LCAA extends the LCA framework by
recognizing the possible presence of alternative activities along the cradle-to-grave logistics
chain and by including economic costs. There are then mathematical degrees of freedom
present in the configuration of the chain, and choices have to be made. LCAA represents this
choice situation as a task of optimization of a mathematical programming model. Points along
the product chain where choices are to be made and alternative activities can be chosen are
forking points in the product flow. There exist in principle two kinds of such branching
19

situations: (i) simple (linear) alternative routings and (ii) the possibility of reuse of a product;
recycling of its component materials or recovery of its energy content (introducing loops in
the product flow). However, just because reuse or recovery is technically feasible, it does not
follow that they are environmentally or economically superior. LCAA will evaluate all
possible reuse and recovery opportunities available and will select those routings of the
product flow that minimize total costs and commensurate with the environmental targets
defined. Additionally, this joint format allows for the quantification in financial terms of the
costs associated with limitations imposed (through determination of the respective shadow
costs).
5.2.

Further Research and Limitations of the Approach

The mathematical models presented assume linearity, which is acceptable when the life cycle
of the product being modeled induces only marginal changes in the activity levels of the
operations being considered. However, if specific aspects of the life cycle are acknowledged
as non-linear, then non-linearity has to be introduced and defined mathematically in an
appropriate manner.
The data chosen for the numerical illustrations in the present paper were supposed to be timeindependent. This assumption is also used by standard approaches such as LCA and MFA. It
may be permitted when short (up to one year) product life cycles (including disposal and
recovery) are considered. However, many life cycle problems involve much longer time
spans, simply because many products are durable and last for decades before they are
disposed of. Further complications are introduced when processes and products gradually
change over the long run. It may be possible to deal with such situations by estimating the
LCAA model using time series data for time-dependent variables. Unfortunately, lack of time
series data may strongly limit the extension of LCAA to include such dynamic issues. For
both static and dynamic models, accuracy and completeness of data is a very important. In the
absence of reliable data, both the LCAA analysis and the assessment of its results will be
seriously hampered.
The considerable amount of information needed by the LCAA model requires the cooperation of many different specialists. The industrial engineer's approach operating on
process or plant level and focused on logistics and cost accounting will be one ingredient in
this joint effort. The economist's approach operating on regional or macro economic level
will be another. The environmental scientist/engineer evaluating environmental impacts needs
certainly to be integrated. All these contributions need to be brought together in a
complementary fashion.

NOTATION
A
B
c
d

matrix of input coefficients; each element denotes the quantity of an input required to
operate an activity at unit level
matrix of output coefficients; each element is the quantity of an output obtained when
an activity is operated at unit level
row vector of unit costs of operating the various activities, it is known and given
column vector of final demand, it is known and given;

20

matrix of unit environmental burdens; each element is the environmental burden

generated in the upstream processing, transportation and manufacture of one unit of
primary goods
F(j,i) matrix of relative environmental impact coefficients
g
a vector of environmental goals defined in terms of burdens
g
a vector of goals defined directly in terms of environmental impact categories, g' =
F(j,i).g
p
a row vector of unit prices of recovered goods
q
a row vector of unit costs of primary goods
w
a column vector of supply levels of primary goods, such as material and energy from
the background system
x
a column vector of unknown activity levels
y
a column vector of unknown levels of recovery of intermediate goods; zero entries
indicate recovery entirely in the foreground, positive entries indicate recovery supplied
from the foreground to background

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Superscripts
E
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F
final goods
I
intermediate goods
P
primary goods

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