An Approach for Calculating the Environmental External Costs of the Belgian Building Sector

R E S E A R C H A N D A N A LYS I S

An Approach for Calculatingthe Environmental External Costsof the Belgian Building SectorKaren Allacker and Leo De Nocker

Keywords:

damage functionindustrial ecologyinternalizationlife cycle assessment (LCA)marginal abatement costwillingness-to-pay

Summary

This article describes an approach developed to estimate the environmental external costsof the Belgian building sector. Several existing methods and related data sets for determiningthe monetary value of environmental impacts were reviewed and compared in light of theirrelevance to an impact assessment of the construction sector. This study concludes thatthe methods available consider different impacts and differ substantially in monetary valuesfor identical impacts. A harmonized and transparent method is recommended to improvethe feasibility and acceptance of internalizing external costs; agreement on the impacts tobe assessed and their external costs based on current insights is important. Here, a newmethod is proposed for a life cycle impact assessment-based valuation of environmentalexternal costs for application to the Belgian building sector. To enable a comprehensiveassessment, it became clear that solely considering “key” pollutants is insufficient.

Although this article focuses on the development and not on the implementation ofthe method proposed, implementation revealed that the life cycle environmental externalcost of new buildings (meeting current insulation standards or better) is relatively smallcompared to the life cycle financial cost.

Introduction

In every country, the construction industry is a majorcontributor to socioeconomic development. Environmentally,however, this sector is responsible for high energy consumption,solid waste generation, global greenhouse gas emissions, adversehealth effects, environmental damage, and resource depletion(Ortiz et al. 2009). The European Commission expressed theneed for internalizing external costs in 1990 in their “Green pa-per on the urban environment.” This report stated that “at theheart of the conflict, however, is the fact that the market econ-omy currently doesn’t ‘internalize’ the environmental costs. Itdoes however have the potential to do so” (Commission of theEuropean Communities 1990, 33–34).

Address correspondence to: Karen Allacker, K.U.Leuven, Dept. ASRO, Kasteelpark Arenberg 1 B-3001 Leuven, Belgium. Email: [email protected]

c© 2012 by Yale UniversityDOI: 10.1111/j.1530-9290.2011.00456.x

Volume 00, Number 00

Insight into the environmental external costs of the Bel-gian building sector was gained through the government man-dated research project SuFiQuaD (Sustainability, Financial,and Quality Evaluation of Dwelling Types). Part of the method-ology concerning monetary valuation is presented in the subse-quent paragraphs.

The objective of monetary valuation in the research wasto express, in monetary terms, how the welfare of current andfuture generations is affected by the environmental impactscaused by activities in the building sector. This valuation con-cerned overall impact, which was defined as the damage im-posed on human health, ecosystems, and resources. These envi-ronmental costs (also referred to as “external costs” or “shadowcosts”) arise when the activities of one group of people have an

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Figure 1 Methodological framework of monetary valuation in life cycle assessment, based on ISO 14040 (2006a).

impact on others, and when the first group fails to fully accountfor these impacts (European Commission 2008). The costs arepassed on to society as a whole (e.g., health impacts from airpollution) or to future generations (e.g., global warming).

Approach to Monetary Valuation

Monetary valuation is an optional evaluation step in lifecycle assessment (LCA). A detailed elaboration of the differ-ent steps of LCA can be found in the 14000 standards of theInternational Organization for Standardization (ISO 2006a,b).There are two quantification options to determine these mon-etary values, illustrated in figure 1. One can either determinethe external cost of the inventoried inputs and outputs (1) orone can first determine the environmental impacts of these in-puts and outputs (2a) and then translate these impacts intomonetary terms in a second step (2b).

Because few market prices exist for emissions or environmen-tal impacts, different approaches exist for estimating these mon-etary values. Because these values implicitly involve weightingof the emissions and/or impacts (e.g., €200/ton carbon dioxide[CO2] and €50/ton sulfur dioxide [SO2] assumes CO2 is fourtimes more important than SO2), a sensitivity analysis of themost uncertain values is important, if not necessary.1

Willingness to Pay Versus Marginal Abatement Cost

Different methods have been developed to determine themonetary value of environmental impacts. These can be clas-sified into two main approaches (de Bruyn et al. 2010; Huppeset al. 2007), reflecting either individual or collective prefer-ences and budget constraints. The first approach (the damagefunction approach) determines the monetary value of welfarelosses from impacts. This requires a bottom-up assessment ofhow emissions or environmental burdens will affect specificwelfare outcomes (e.g., health impacts, loss of agricultural pro-duction, soiling of buildings). In this approach, the monetaryvalue is given at the endpoints of a life cycle impact assessment(LCIA). The specific impacts can be valued based on people’swillingness to pay (WTP) to avoid these impacts, reflectingtheir individual preferences and individual budget constraints.Therefore we refer to these methods as the WTP approach. Inthe second approach, the monetary values are based on the costs

of additional emission reduction measures to be taken in othersectors to compensate for construction sector emissions. Thesecosts depend on which sectors have to act, and which actionsthey have already taken. The monetary values determined ac-cording to this approach depend on the policy objectives andplans related to these environmental problems. These objec-tives and plans reflect the collective preferences of society andcollective budget constraints. This second approach is calledthe marginal abatement cost (MAC) approach (also known asthe reduction, avoidance, prevention, or control cost approach,and referred to by some authors as the maximum abatementcost approach [Oka 2005]). A more extensive overview of ap-proaches is given by Huppes and colleagues (2007). In addition,Weidema (2009) defines values based on budget constraints andon explicit assumptions of preferences related to human healthand biodiversity.

As elaborated by Oka and colleagues (Oka 2005, Oka etal. 2005), the monetary values determined by both approacheshave different meanings. The WTP values reflect individualwelfare losses in society due to the environmental impacts ofthe construction sector. The MAC values reflect welfare lossesbecause other sectors have to face additional costs to compen-sate for the impacts of the construction sector.

Because the aim of this study is to inform policy makers,the WTP approach was most appropriate, as it describes welfarelosses based on individual preferences (De Nocker et al. 2004).If data on the WTP method were not available, data based onMAC were used. It has to be noted that, in practice, most WTPmethods and data sets combine information based on individualand collective preferences and budget constraints.

Willingness-to-Pay Methods

A nonexhaustive list of available WTP methods was in-vestigated in order to select the most appropriate one for thisresearch.

ExternEExternE (External costs of Energy) is a research project of

the European Commission (European Commission 2008) thatprovides a framework for assessing the external costs of energyuse with the damage function approach (Bickel and Friedrich2005). Health impacts are assessed in detail and valued in terms

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Table 1 Comparison of the monetary values of key pollutants as estimated by four studies

CAFE BE,1 low-end scenario EPS version 20002 RDC Environnement3 Vogtlander4

(€/ton) (€/ton) (€/ton) (€/ton)

NH3 30,000 1,960 18,000 —NOx 5,200 2,130 6,000 —PM2.5 61,000 72,000 53,000 12,300SO2 11,000 3,270 5,000 6,400VOCs 2,500 2,140 605 50,000CO2-equivalents 505 108 96 114

Notes: NH3 = ammonia; NOx = nitrogen oxides; PM2.5 = particulate matter ≤ 2.5 μm; SO2 = sulfur dioxide; VOCs = volatile organic com-pounds; CO2 = carbon dioxide. 1 CAFE BE reference = Holland et al. 2005; 2 EPS 2000 reference = Steen 1999; 3 RDC Environment ref-erence = D4E-RDC Environment 2007; 4 Vogtlander reference = Vogtlander 2001; 5 The monetary value for the CO2-equivalents is takenfrom Davidson and colleagues (2002) and corresponds to the ExternE recommendation for an upper bound. Data are from Allacker (2010,61).

of additional costs for the health sector, productivity losses, andthe WTP to avoid pain, suffering, and loss of life expectancy.This last value is the most important category quantified andis based on a recent set of contingent valuation (Nunes andNijkamp 2007) studies in Europe (Desaigues et al. 2006; Readyet al. 2004). Other impact categories, such as damages to cropsor materials, have been valued based on market prices or clean-ing and repair costs. Overall, the WTP method successfullyaccounts for impacts on human health, but fails to estimateimpacts on ecosystems and from global warming. For globalwarming, the results of the damage function approach are moredifficult to use, as models do not capture all possible impacts,the estimates are incomplete, and the values of known impactsare more uncertain. Therefore the MAC approach is used inExternE to value global warming. The impacts from acidifica-tion and eutrophication on ecosystems have been valued basedon the costs of additional measures to compensate for lossesof biodiversity. ExternE does not provide data related to thedepletion of fossil fuels or nonrenewable resources.

The data for our study have been taken from calculationsmade during preparation for the European Clean Air For Europe(CAFE) program, which was (at that time) the most recentset of data that had gone through a review process associatedwith the CAFE discussions (Holland et al. 2005). The valuesvalid for Belgium were used. Four combinations of sensitivitywere defined in which the low-end scenario was selected forimplementation within this research (table 1). Because CAFEdoes not include a monetary value for global warming, the valuefor the Netherlands (€50/ton CO2-equivalent) recommendedby Davidson and colleagues (2002), and as an upper bound byExternE, was used.2 This value is between MACs for the short-and long-term from recent literature (Anthoff et al. 2009; deBruyn et al. 2010; Kuik et al. 2009; Stern 2006; Tol 2005;Downing et al. 2005).

Environmental Priority StrategiesThe environmental priority strategies in product design sys-

tem (EPS) was developed by Steen and colleagues (Steen 1999).The method assigns a monetary value to “safeguard subjects,”which are defined as the things that one wants to safeguard in

the environment (e.g., human health and biodiversity). Themonetary values are the WTP to restore changes in the safe-guard subjects. Five subjects are assessed: human health, ecosys-tem production capacity, abiotic stock resources, biodiversity,and cultural and recreational values.

Monetary values are based on market prices, when available,or on contingent valuation methods (for morbidity, nuisance,and recreation values). For the abiotic stock resource deple-tion, a market scenario was created “where the production costof substances similar to the a-biotic stock resources is used asan estimate of WTP” (Steen 1999, 50). The specific values aredocumented in the report “Implementation of Life Cycle Im-pact Assessment Methods” (Frischknecht and Jungbluth 2007);those considered in this research are summarized in table 1.

RDC EnvironnementThe study “les benefices environnementaux du recyclage”

[the environmental benefits of recycling] executed for “laDirection des Etudes Economiques et de l’ Evaluation Environ-nementale” [the Economic Studies and Environmental Evalua-tion Directorate] (D4E) bases monetary values of environmen-tal impacts partly on literature and partly on work done withinthe project (D4E–RDC Environnement 2007).

The monetary values were mainly derived from contingentvaluation methods and market prices. For each of the impacts,the environmental cost was determined and those costs alreadyinternalized were deducted to obtain the external environmen-tal cost. The RDC Environnement study incorporates a widerange of impacts: acidification of air, global warming, ozone layerdepletion, degradation of water quality, human and ecosystemtoxicity, depletion of resources, disamenity, damage to struc-tures, and cultural effects. In table 1, the monetary values aresummarized for the key pollutants in accordance with the pre-viously described studies.

Maximum Abatement Cost: Eco-costs of Vogtlander

The method developed by Vogtlander is based on the MACapproach, but it differs from other MAC methods: the target wasnot based on policy goals, but was instead determined by, “theearth’s estimated carrying capacity” according to the definition

Allacker and De Nocker , Environmental External Cost of the Building Sector 3


of eco-efficiency by the World Business Council for SustainableDevelopment (Vogtlander 2001, i). The costs were estimatedbased on environmental impact prevention measures sufficientto make our society sustainable. As stated by the author, “the‘norms for sustainability’ are based on the ‘negligible risk levels’for concentrations and the corresponding ‘fate analyses’, beingthe link between concentration and emissions” (Vogtlander2001, iii).

Although this concept looks attractive, it is questionablewhether “a negligible risk level” can be defined, or to whatextent this can be done without accounting for preferences ofsociety to reduce these risks and balance the costs and benefitsof these reductions. The norm for global warming, for example,assumes a 50% reduction of greenhouse gas emissions by 2030compared to the year 2000 for Western Europe. One can ques-tion, however, whether such a reduction adequately defines thenorm for sustainability. It is unlikely that such a reduction willreduce impacts from global warming to a level that is negligi-ble, whereas it is ambitious in terms of required policy actions(IPCC 2007; Kuik et al. 2009). In table 1 the prevention costsare summarized as proposed by Vogtlander for The Netherlandsand Europe.

Comparison of Methods

The monetary values determined for the key pollutantswithin each method were compared using the central estimate(table 1); it is thus a partial comparison. Although the firstmethod is a combination of monetary values taken from CAFEand Davidson and colleagues (2002), it is hereafter referred toas the CAFE method. With the exceptions of ammonia (NH3)and volatile organic compounds (VOCs), the values fall withinthe same order of magnitude, reflecting similar understandingsand key data between the studies. The central values, however,differ substantially between the methods.

In order to select the most appropriate method for this re-search, the four methods were applied to calculate and comparethe external costs of several transport and energy processes, aswell as the production costs of frequently used, load-bearingbuilding materials in Belgium. The inventory data were takenfrom the Ecoinvent database (Ecoinvent 2009).

With few exceptions, the values determined by Vogtlanderled to the highest environmental external cost. This was dueto the high external cost of CO2-equivalents compared to theother methods, and the fact that the contribution of CO2-equivalents was the most important cost for most products andprocesses. The products and processes with a lower cost werethose for which the largest part of the impact was determinedby the emission of particulate matter 2.5 (PM2.5), which wasassigned a lower monetary value from Vogtlander than fromthe other methods. The lowest external cost was, in most cases,obtained by the CAFE values, which can be explained by thecomparatively low monetary value given to CO2-equivalents.The assessment furthermore reveals that the monetary valuesbased on EPS version 2000 were higher than those based onCAFE. This was due to a higher monetary value for PM2.5

by EPS, which was not compensated for with lower costs ofthe other pollutants. Finally, the environmental external costcalculated according to the RDC Environnement method formost products and processes lay between the environmentalcosts calculated with the CAFE and EPS version 2000 meth-ods. Exceptions were noted for some of the transport processes,which are characterized by a high level of nitrogen oxide (NOx)emissions.

Figure 2 illustrates the results of the analysis for the transportprocesses. All four methods led to the same ranking, exceptfor the passenger diesel car, which Vogtlander ranked with alower external cost than the petrol car. This is explained byhigher emissions of NOx and PM2.5 and lower emissions of theother substances by the diesel car, and the fact that Vogtlanderdoes not consider NOx and uses a relatively low cost for PM2.5.

For the load-bearing structure of the walls (figure 3), themethods provided estimates that differ by a maximum fac-tor of two. This difference had implications on the rankingof alternatives. While clay bricks were preferred over cellu-lar concrete blocks according to Vogtlander and EPS version2000, the opposite was true according to CAFE and RDC En-vironnement. This discrepancy was due to lower emissions ofCO2-equivalents and NH3, and higher emissions of SO2, NOx,and PM2.5 for clay bricks compared to cellular concrete blocks.However, the difference in external costs of both alternativeswas so small that it was assumed to be insignificant due to theuncertainties.

If we account for overall uncertainties, the different methodsgive similar results for estimates of external costs. Monte Carlosimulations that account for uncertainties in the different stepsof the WTP methods indicate that the geometric standard de-viation for quantified external costs for air pollutants is aroundthree (Rabl et al. 2005; Spadaro and Rabl 2008). For otherimpacts (e.g., global warming, impacts on ecosystems), uncer-tainties are higher, with geometric standard deviations aroundfour or five. Applying these data in the context of LCIA offersadditional uncertainty for those impacts in which the locationof emissions is important. It has been illustrated that even ifoverall uncertainties are large, the ranking of, for example, ma-terials may be robust (Int Panis et al. 2001, 2002).

It can be concluded that although the ranking of the build-ing materials and processes was approximately identical basedon the four applied methods, discrepancies occurred. In conse-quence, although a single score is desirable to enable straight-forward decisions, it is important to transparently inform thedecision maker about underlying assumptions and provide de-tailed impacts so as to enable decisions based on single impactsif desired.

Selected Method

The comparison revealed that the four methods lead to com-parable external costs and could all be valid for estimating theexternal cost of the construction sector. Because of its trans-parency and broad acceptance by the scientific community,the ExternE–CAFE method was selected. It was combined with



Figure 2 Comparative analysis (partial) of the external cost of transport processes according to four monetary valuation methods(Allacker 2010, 62). tkm = ton-kilometer, pkm = person-kilometer.

other sources in order to cover the impacts excluded by ExternE(which focuses on energy and transport processes) but relevantto the building sector. The applied approach was thus a com-bination of existing methods and can therefore be consideredas hybrid (figure 4). There is a trade-off between completeness(number of impacts included) and certainty. It was decided toinclude global warming and impacts on ecosystems, althoughthese are more uncertain and use different approaches comparedwith, for example, health impacts.

Because the method needed to be linked to the more com-plex model of an LCIA of dwellings that considers more than20,000 different options, the space for uncertainty and sensitiv-ity analysis was limited. The method therefore developed cen-tral estimates with an additional sensitivity analysis for globalwarming because of its importance in the life cycle of a build-ing. For an average building (current common practice) in Bel-gium, the CO2-equivalents represent 65% of the external cost(Allacker 2010).

Figure 3 Comparative analysis (partial) of the external cost of the load-bearing components of walls according to four monetary valuationmethods (Allacker 2010, 64). cm = centimeter.



Figure 4 Scheme summarizing the hybrid method proposed for the assessment of the external costs in the Belgian building sector, basedon Allacker (2010, 66). CML = Centrum Milieukunde Leiden (Institute of Environmental Sciences); (1) = airborne emissions, impact onhuman health and crops; see article text below for further description of (2); DALY = disability adjusted life years; PDF = potentiallydisappeared fraction; ExternE - CAFE (2005) reference = Holland et al. 2005; EC WETO-H2 (2006) reference = European Commission2006; ∗ sensitivity analysis: high end (Downing et al. 2005); ∗∗ value based on weighted averages of WTP studies that value morbidity andmortality health impacts; ∗∗∗ value based on marginal restoration costs to restore biodiversity by 20%; ∗∗∗∗ impact assessment based ondefault hierarchist perspective, in megajoules/megajoules.

Monetary Valuation of Human Health Effects

The human health effects considered were respiratory ef-fects, carcinogenic effects, ionizing radiation, ozone layer de-pletion, and global warming. Care was taken to not doublecount health impacts from emissions already valued by ExternE–CAFE.

Within the ExternE methodology, the human health im-pacts due to the emissions of SO2, NOX, PM2.5, NH3, andVOC (total damage by pollutant) are considered (indicated by(1) in figure 4). The ExternE method was used for the mone-tary values of the human health effects of these emissions. Asimpacts on public health are the most dominant impacts, pop-ulation density plays an important role in the site specificity ofthe impacts. From this perspective, it was important to use datafor Belgium (high population density) instead of average datafor the European Union (EU). For this reason, the monetaryvalues from the CAFE project for the Belgian context were used(table 1).

As mentioned before, a value of €50/ton CO2-equivalent((2) in figure 4) was assumed for global warming. The robust-ness of conclusions was tested with a higher value of €150/ton(Davidson et al. 2002). For the determination of the CO2-equivalents, the Centrum Milieukunde Leiden (CML) methodwas applied (Guinee et al. 2002). Huppes and colleagues (2007),however, compared five impact assessment methods for the cal-culation of CO2-equivalents and concluded that all methodsdiffer substantially.

The harmful emissions for human health mentioned aboveare further referred to as key emissions. Other emissions thanthese key emissions harming human health were addressed byusing the Eco-indicator 99 method (Goedkoop and Spriensma

2001). This method was developed by Pre Consultants in col-laboration with international research groups. It addresses, in aconsistent manner, a wide range of pollutants and emissions toair, water, and soil and considers the impacts on human health,quality of ecosystems, and depletion of resources. This methodwas selected because it covers a wide range of impacts, it istransparently reported, and it is widely recognized by LCA ex-perts. Eco-indicator 99 expresses the impacts on human healthin disability adjusted life years (DALYs). The translation ofthe inventory data into the number of DALYs is based on afour-step procedure that is elaborated in detail in the method-ology report (Goedkoop and Spriensma 2001). To avoid dou-ble counting, the above-mentioned key emissions (indicated by(1) and (2) in figure 4) were excluded from the health effectsin Eco-indicator 99. More specifically, the CO2-equivalentswere excluded from the assessment of the carcinogens, climatechange, ozone layer depletion, and respiratory effects (organicsubstances); the PM2.5 emissions were excluded from the as-sessment of the carcinogens and respiratory effects (inorganicsubstances); and the SO2, NOx, NH3 (inorganic), and VOC(organic) emissions were excluded from the assessment of therespiratory effects.

Two approaches are possible for the monetary valuation ofDALYs. The first approach is to consider the monetary val-ues available for the main individual health impacts due topollution. The values for acute and chronic mortality are re-spectively estimated at €75,000/DALY and €50,000/DALYaccording to the valuation studies used in ExternE (Bickel andFriedrich 2005, 147). For morbidity related to air pollution andnoise, the weighted average is €87,000/DALY. The weightingis based on the total share of the morbidity impacts from air



pollution and noise in Flanders, as estimated by Torfs and col-leagues (2005). The second approach for valuing a DALY is touse the costs for medical treatments that society is willing topay to prevent (e.g., screening for breast cancer) or cure healthimpacts. These costs can be seen as an indicator of society’sWTP for one healthy year of life. In developed countries, theUSD$50,000 to $100,000/DALY threshold is often used to de-termine cost-effectiveness for health interventions. (All furtherreferences to dollars are in U.S. dollars.) This range is similar tothe ranges from estimates based on WTP from citizens for spe-cific health impacts (Hirth et al. 2000; Hofstetter and Muller-Wenk 2005). In summary, all of these studies and indicatorssupport a valuation in the range between €50,000/DALY and€100,000/DALY. Because the impact of chronic mortality hasan important share of total health impacts, a value closer tothat for chronic mortality is most appropriate. Furthermore,more recent studies have found lower WTP values for chronicmortality (Desaigues et al. 2006). This supports the argument touse the lower part of the range for the valuation of DALYs, andtherefore a rounded number of €60,000/DALY was used as thecentral estimate. This value is in line with the valuation basedon the budget constraint method (€62,000 to €84,000/DALY)(Weidema 2009).

Monetary Valuation of Resource Depletion

Because depletion of resources is not addressed within theExternE method, other approaches were sought. The cost tosociety of the use of natural resources and land is partly reflectedin the market prices, and is thus partly an internal cost. For theexternal costs, the additional impacts not reflected in the marketneed to be dealt with. A distinction is made between depletionof minerals and fossil fuels. Land use is discussed separately inthe subsequent section.

The Eco-indicator 99 method was used. This method con-siders the additional amount of energy (in joules) required forfuture exploration as a damage indicator for resource (fossil fu-els and minerals) depletion.3 The relevant price is the expectedprice in the future. Future prices for oil and gas have been es-timated in several sources to be in the range of $110/barrelof oil and $100/barrel of oil equivalent (boe) for gas by 2050(European Commission 2006). This corresponds to a currentvalue of $20/boe to $60/boe, using a discount rate of 1% or 3%.The price level of €40/boe (0.0065 €/megajoules [MJ]) wastherefore considered an adequate figure to value this impact.4

Monetary Valuation of Impacts on Ecosystems

As impacts on ecosystems are not included within the Ex-ternE method, Eco-indicator 99 was used to assess acidification,eutrophication, and land use. The damage is expressed as thepercentage of species that have potentially disappeared in acertain area due to the environmental load (potentially disap-peared fraction [PDF]) (Goedkoop and Spriensma 2001). Theindicator, expressed as PDF × square meters (m2) × years, ac-counts for the size of the affected area (in m2) and the durationof impacts.5

Valuation is based on a study by Ecoconcept-ESU that useda restoration cost approach to value the PDF indicator (Ottet al. 2006). This study used cost data from Germany andSwitzerland to change from one type of land use to anotherin order to restore biodiversity. This led to a broad range ofcosts per PDF restored. It also used the marginal costs to im-prove biodiversity by 20%, using the cheapest land use trans-formations. This led to a cost of €0.49/PDF × square meters ×years, which corresponds to the costs to restore integrated arableland into organic arable land. Kuik and colleagues (2007) es-timated a similar value (€0.47/PDF × m2 × years) based ona meta-analysis of WTP studies for biodiversity conservation.This value is in line with the estimate of Weidema (2009) basedon the budget constraint method. Weidema’s value of €3,500per biodiversity affected hectare year (BAHY) corresponds to€0.35/PDF × square meters × years.

Results of the Application to BuildingMaterials and Processes

Relative Importance of Different Impacts to TotalExternal Cost

An analysis was made of the contribution of the different im-pacts to the total external cost, and was used to check whetherthe hybrid approach proposed is preferable to a simpler assess-ment of a few key pollutants. Moreover, a relation was soughtbetween the results and external costs completely based onmonetary values for DALYs, PDF × square meters × years, andmegajoules surplus energy. This relation was investigated fortwo reasons. First, it clarified whether the results of both meth-ods were comparable, and thus if the proposed hybrid methodwas in line with the broadly accepted Eco-indicator 99 method.Second, it clarified whether the Eco-indicator 99 approxima-tion was sufficiently accurate, or a more detailed analysis (asproposed) was required.

The contribution of the different impacts to the total exter-nal cost was analyzed for the same limited selection of processesand materials as in the previous section. The comparison withcalculations based on DALYs, PDF × square meters × years,and megajoules surplus energy was made for a more extendedlist.

Building MaterialsThe analysis of the building materials (figure 5) revealed

that the contribution of the external costs of the key emissions(included within ExternE) were, on average, responsible for64% of the total external cost. The minimum contribution,however, equaled 12% and the maximum 83%. This clearlyindicates that it is important to include the extra impacts fora comprehensive assessment. This conclusion remained validfor the sensitivity analysis with a monetary value of €150/tonCO2-equivalent, resulting in an average contribution of 75%of the key emissions, with a minimum of 12% and a maximumof 92%.

The comparison of the proposed hybrid approach with anevaluation of the external cost based on Eco-indicator 99(figure 6) illustrates that the results correspond well and that



Figure 5 An analysis of the impacts of building materials included in ExternE and other impacts according to the hybrid approach, basedon Allacker (2010, 73). Note the horizontal line separates ExternE impacts and other impacts.

Figure 6 A comparison of the external costs of building materials (each dot represents one building material) calculated using the hybridmethod and using the approach based on Eco-indicator 99 (Allacker 2010, 74).



Figure 7 An analysis of the impacts of transport processes included in ExternE and other impacts according to the hybrid approach, basedon Allacker (2010, 72). Note the horizontal line separates ExternE impacts and other impacts.

the Eco-indicator cost represents about 73% of the cost calcu-lated using the hybrid approach. The difference is due to themore detailed calculation of the external health effects costswithin the hybrid method, which reflect the greater impactsof air pollutants in Belgium due to high population density.Within a sensitivity analysis, an increased external cost of theCO2-equivalents (€150/ton) resulted in a smaller correspon-dence between the two approaches. The Eco-indicator costrepresented only 51% of the cost calculated using the hybridapproach.

Transport and Energy ProcessesThe analysis of the transport processes (figure 7) revealed

that the contribution of the external costs of the key emissionswere, on average, responsible for 69% of the total externalcosts. The minimum contribution equaled 57% and the max-imum 80%. Although this was higher than for the materials,it still seems important to include the extra impacts to enablea comprehensive assessment. When assuming a higher envi-ronmental external cost for the CO2-equivalents (€150/ton)as a sensitivity analysis, similar conclusions were drawn, withan average contribution of the key emissions of 77%, a min-imum of 69%, and a maximum of 87% of the total externalcosts.

Comparison of the proposed hybrid approach with an eval-uation based on Eco-indicator 99 illustrated that results corre-spond well and that the Eco-indicator cost represents about 65%of the cost calculated using the hybrid approach. A similar con-clusion could be drawn for the sensitivity analysis (€150/tonCO2-equivalent), though the Eco-indicator cost then repre-sented only 42% of the cost calculated with the hybrid ap-proach.

Analysis of the energy processes revealed that, on average,the contribution of the external costs of the key emissions equals68% of the total external costs; the minimum contributionequals 42% and the maximum 77%. Again, this indicates thatit is important to include the extra impacts to enable a compre-hensive assessment. The sensitivity analysis of the higher mon-etary value for the CO2-equivalents (€150/ton) led to similarresults, with an average contribution of 79%, a minimum of44%, and a maximum of 89%.

The comparison of the proposed hybrid approach with theexternal costs based on Eco-indicator 99 revealed that the re-sults correspond well and that the Eco-indicator cost representsabout 60% of the cost calculated using the hybrid approach. Thesensitivity analysis of the monetary value for CO2-equivalents(€150/ton) resulted in a smaller correspondence between thetwo approaches, with the Eco-indicator cost representing only50% of the cost calculated using the hybrid approach.

It can be concluded that for the evaluation of materials,energy, and transport processes, a more detailed calculation ofthe external costs is required.

Ratio of External Cost to Financial Cost

In this final section, further use of the method developed forthe LCIA of dwellings in combination with life cycle costingis illustrated. Although not elaborated in detail, it gives insightinto the relevance and possible opportunities for further imple-mentation of the method. A detailed description of both theanalyzed cases and the results can be found in the research ofAllacker (2010).

The internal financial and external environmental life cy-cle costs of 16 representative dwellings, ranging from detached



houses to apartments, were analyzed (Allacker 2010). The sumof both costs was calculated, defined as the total life cycle cost, toinvestigate if internalization of the environmental costs wouldlead to different decisions aimed at more sustainable dwellings(e.g., dwelling type, material choice, and insulation level). Foreach of the dwellings, about 20,000 options—ranging fromnoninsulated to low-energy variants and from solid to skele-ton alternatives—were investigated. The analysis revealed thatthe environmental external life cycle cost represented about 5%to 10% of the total life cycle cost for newly built and up to 16%for existing dwellings. The highest contribution was identifiedfor heating, and equaled approximately 30% of the total cost.Although this concerned a relatively small contribution on alife cycle basis, the optimized dwellings were composed differ-ently when the external costs were taken into account. Otherbuilding materials gained preference and the insulation level ofthe dwellings increased. It can thus be concluded that inter-nalization would enhance the move toward a more sustainabledwelling stock without leading to unaffordable housing.

These results were based on the central estimates for externalcosts. Recent studies, however, recommend external costs forgreenhouse gasses that increase over time to up to €200/tonCO2-equivalent (Kuik et al. 2009). If this is taken into account,internalization of external costs might influence decisions to alarger extent.

Conclusions

This article proposed a hybrid approach for the LCIA ofbuildings in Belgium. Such an integration of existing LCIAmodels was required because approaches focusing on a few keypollutants significantly underestimate the impacts from certainbuilding products and processes. To this purpose, the proposedhybrid approach builds on the extended impact assessmentmethod of Eco-indicator 99. The end-point indicators of Eco-indicator 99 were valued in monetary indicators based on datafrom the literature. The hybrid approach combined this with amore detailed, site-specific assessment of health impacts fromkey air pollutants that took population density into account.This article illustrates that although a rougher estimation of theexternal cost based on the end-point indicators of Eco-indicator99 is in line with the proposed hybrid approach, it representsonly about 60% to 75% of the external cost determined by theproposed hybrid method.

The hybrid approach is open to account for new data, bothin the field of LCIA and monetary valuation. Especially for thevaluation of impacts on ecosystems, more and better approachesfor quantification and valuation are required.

Finally, it was concluded that if the external costs ofdwellings on a life cycle basis are taken into account, differentdecisions are made related to insulation levels and choice ofbuilding materials. Because both the initial and life cycle exter-nal costs of buildings—based on these central values—proved tobe small compared to the financial costs, internalization wouldnot lead to a large increase in life cycle costs or to unaffordable

housing. Because of the identified importance of global warm-ing to the life cycle environmental cost of dwellings, a higherenvironmental external cost of CO2-equivalents in the futuremight increase the consequences of internalization.

Acknowledgements

Special thanks go to the Belgian Science Policy (BELSPO),Science for a Sustainable Development (SSD), which financedthe project “Sustainability, Financial and Quality Evaluation ofDwelling Types (SuFiQuaD)” (2007–2011) and to the project-colleagues from K.U.Leuven, the Flemish Institute for Tech-nological Research (VITO) and the Belgian Building ResearchInstitute (BBRI).

Notes

1. One metric ton (t) = 103 kilograms (kg, SI).2. CO2-equivalent: carbon dioxide equivalent is “a measure used to

compare the emissions from various greenhouse gases based upontheir global warming potential. For example, the global warmingpotential for methane over 100 years is 21. This means that emis-sions of 1 million metric tons of methane is equivalent to emis-sions of 21 million metric tons of carbon dioxide” (Organisationfor Economic Co-operation and Development [OECD], Glossary ofStatistical Terms, 2007, 93).

3. One joule (J, SI) ≈ 2.39 × 10−4 kilocalories (kcal) ≈ 9.48 × 10−4

British thermal units (BTU).4. One megajoule (MJ) = 106 joules (J, SI) ≈ 239 kilocalories (kcal)

≈ 948 British thermal units (BTU).5. One square meter (m2, SI) ≈ 10.76 square feet (ft2).

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About the Authors

Karen Allacker is a postdoctoral researcher at theKatholieke Universiteit (K.U.Leuven) in Leuven, Belgium. LeoDe Nocker is a researcher at the Flemish Institute for Techno-logical Research (VITO) in Mol, Belgium.


http://www.ecoinvent.org

Documents

An Approach for Calculating the Environmental External Costs of the Belgian Building Sector