Measuring raw-material criticality of product systems through an economic product importance indicator: a case study of battery-electric vehicles

Purpose: The concept of criticality concerns the probability and the possible impacts of shortages in raw-material supply and is usually applied to regional economies or specific industries. With more and more products being highly dependent on potentially critical raw materials, efforts are being made to also incorporate criticality into the framework of life cycle sustainability assessment (LCSA). However, there is still some need for methodological development of indicators to measure raw-material criticality in LCSA. Methods: We therefore introduce "economic product importance" (EPI) as a novel parameter for the product-specific evaluation of the relevance and significance of a certain raw material for a particular product system. We thereby consider both the actual raw-material flows (life cycle inventories) and the life cycle cost. The EPI thus represents a measure for the material-specific product-system vulnerability (another component being the substitutability). Combining the product-system vulnerability of a specific product system towards a certain raw material with the supply disruption probability of that same raw material then yields the product-system specific overall criticality with regard to that raw material. In order to demonstrate our novel approach, we apply it to a case study on a battery-electric vehicle. Results: Since our approach accounts for the actual amounts of raw materials used in a product and relates their total share of costs to the overall costs of the product, no under- or over-estimation of the mere presence of the raw materials with respect to their relevance for the product system occurs. Consequently, raw materials, e.g. rare earth elements, which are regularly rated highly critical, do not necessarily reach higher criticality ranks within our approach, if they are either needed in very small amounts only or if their share in total costs of the respective product system is very low. Accordingly, in our case study on a battery-electric vehicle product system, most rare earth elements are ranked less critical than bulk materials such as copper or aluminium. Conclusion: Our EPI approach constitutes a step forward towards a methodology for the raw-material criticality assessment within the LCSA framework, mainly because it allows a product-specific evaluation of product-system vulnerability. Furthermore, it is compatible with common methods for the supply disruption probability calculation -- such as GeoPolRisk, ESP or ESSENZ -- as well as with available substitutability evaluations. The practicability and usefulness of our approach has been shown by applying it to a battery-electric vehicle

What role do transaction costs play in energy efficiency improvements and how can they be reduced?

Ex-ante policy evaluation requires a detailed understanding of how the subjects addressed by the policy react to its implementation. In the context of energy efficiency, policy measures typically aim at influencing investment decisions towards more efficient options. As has been discussed widely in the context of the "energy efficiency gap", investments in energy efficiency improvements are frequently not conducted even though they seem cost-effective from a simple cost-benefit perspective, where transaction costs have been identified as one important barrier. While transaction costs have been discussed widely from a conceptional perspective, empirical studies quantifying transaction costs and measures to reduce them are rare. This paper presents approaches, results and insights from a recently completed research project funded by the German Federal Energy Efficiency Center (BfEE), addressing transaction costs in various energy efficiency measures and the role of energy efficiency services to overcome the barrier. We analyse a set of 11 energy efficiency investments covering private households, public institutions and the industry sector. We gather data on direct investment costs and energy cost savings and provide a detailed analysis of the various barriers and transaction costs associated with the implementation. We then analyse the costs of existing energy efficiency services using data provided by the BfEE. We compare the different cost elements and analyze the potential of energy efficiency services to reduce transaction costs. We find that the role of transaction costs differs substantially between households, public institutions and companies and that the impact of energy efficiency services on transaction costs needs to be evaluated using different methodological approaches. We conclude that while data availability on disaggregated transaction costs is a major challenge, energy services can reduce transaction costs considerably

Towards a more realistic cost-benefit analysis : attempting to integrate transaction costs and energy efficiency services

In order to calculate the financial return of energy efficiency measures, a cost-benefit analysis (CBA) is a proven tool for investors. Generally, however, most CBAs for investors have a narrow focus, which is - simply speaking - on investment costs compared with energy cost savings over the life span of the investment. This only provides part of the full picture. Ideally, a comprehensive or extended CBA would take additional benefits as well as additional costs into account. The objective of this paper is to reflect upon integrating into a CBA two important cost components: transaction costs and energy efficiency services - and how they interact. Even though this concept has not been carried out to the knowledge of the authors, we even go a step further to try to apply this idea. In so doing, we carried out a meta-analysis on relevant literature and existing data and interviewed a limited number of energy experts with comprehensive experience in carrying out energy services. Even though data is hardly available, we succeeded in constructing three real-world cases and applied an extended CBA making use of information gathered on transaction costs and energy services costs. We were able to show that, despite these additional cost components, the energy efficiency measures are economically viable. Quantitative data was not available on how energy services reduce transaction costs; more information on this aspect could render our results even more positive. Even though empirical and conceptual research must intensify efforts to design an even more comprehensive CBA, these first-of-its-kind findings can counterargue those that believe energy efficiency is not worth it (in monetary terms) due to transaction costs or energy services costs. In fact, this is good news for energy efficiency and for those that seek to make use of our findings to argue in favor of taking up energy efficiency investments in businesses

Erweiterung von Kosten-Nutzen-Analysen zu ausgewählten Energieeffizienzmaßnahmen um Erkenntnisse zum Markt für Energieeffizienzdienstleistungen und zum Aufwand von Investitionen in Energieeffizienz : Endbericht

Eine Kosten-Nutzen-Analyse ist ein bewährtes Mittel, um die Rentabilität einer Energieeffizienzmaßnahme zu bewerten: Die Investitionskosten werden mit den eingesparten Energiekosten verglichen. Investitionsentscheidungen für Energieeffizienzmaßnahmen erfolgen allerdings häufig nicht nach einer reinen Erwägung der direkten Kosten und Nutzen. Gründe hierfür sind unter anderem "versteckte" Kosten und Risiken (z. B. Kosten für die Beschaffung von Informationen, Unsicherheiten über zukünftige Energiepreise und Einsparungen), aber auch nicht-monetäre Hemmnisse, die bei Entscheidungen eine Rolle spielen (z. B. beschränkte Rationalität, Präferenzen, Zeitverfügbarkeit). Vor diesem Hintergrund verfolgt der Bericht das Ziel, ein besseres Verständnis der Kosten-Nutzen-Erwägungen von Investoren und deren Entscheidungswirklichkeit zu erlangen. Die Untersuchung zeigt, dass Energieeffizienzdienstleistungen (EEDL) generell die versteckten Kosten - Transaktionskosten - reduzieren können. Das setzt aber voraus, dass EEDL sachgerecht durchgeführt werden. Transaktionskosten werden allerdings im Zusammenhang mit Energieeffizienzmaßnahmen von den Akteuren kaum wahrgenommen und entsprechend nicht quantifiziert. Des Weiteren zeigt sich, dass insbesondere bei Unternehmen die EEDL-Kosten für bestimmte Maßnahmen hoch sein können. Doch werden gerade in diesen Fällen die Transaktionskosten reduziert. Grundsätzlich erscheinen kostenaufwendigere EEDL, wie umfassendere Vor-Ort-Beratungen, im Gegensatz zu den preiswerteren Vor-Ort-Checks besser geeignet, um Transaktionskosten zu reduzieren

Sustainability and Future Trajectories: How is Prospectivity Integrated into Life Cycle Sustainability Assessment?

The energy transition and associated objectives like climate change mitigation, economic efficiency, social acceptance and security of supply require technologies that are sustainable. With the help of a Life Cycle Sustainability Assessment (LCSA), such a holistic evaluation of energy technologies can be carried out. This in itself is very complex, since criteria of the different sustainability dimensions have to be compiled and integrated to give an overall result. However, LCSA often only considers the current development status of technologies and not their potential future developments. Particularly in the case of emerging technologies, possible future improvements or even negative impacts may occur in the course of technology development, which could significantly change the initial LCSA results. An early consideration of future developments of technologies in the context of so-called prospective LCSA is therefore highly relevant, but also of high complexity and associated with uncertainties. We evaluated how this complex topic of prospectivity has been dealt with in the LCSA community so far by conducting a literature review. Focusing on LCSA of energy technologies, we present our findings related to commonly used prospective methods and data, the underling motivation of their application as well as research gaps and potentials for further development