Figure 20.3 is adapted from the TCA methodology developed by the AICHE CWRT focus group. It is not in the scope of this book to go into the details of how the TCA methodology might be applied to a particular decision; rather, the student is referred to the original
TCA Decision
to be made
TCA TCA
TCA TCA
Stage 1 Conceptualization
Stage 2 Stage3 Stage4 Stage5
Concept Analysis
Validation Development Implementation
Candidate Selection Proofof Concept Committo Development Prepare to Launch
Accuracy of TCA Improves
Data Estimates Nearest Neighbor,
Etc.
Actual, Robust Data FIGURE 20.1 Timing of a total cost assessment.
source document for further clarification.10As can be seen from Figure 20.1, however, the methodology is very similar in form to how one conducts a life cycle inventory and assessment.
As with LCI/A, one of the most critical first tasks isproject definition and scoping. Many times the tendency is to rush through this first step too hastily, only to be frustrated as one
Project Definition and Scoping
Streamline the Analysis
Identify the Potential Risks
Conduct the Total Cost Inventory
Conduct the Impact Assessment
Document the Results
Feedback to the Company’s Main Decision-Making Process
LCI information
input here, if available
Cost Assessment
Focus Area
FIGURE 20.3 Total cost assessment methodology.
1. Determine Potential Costs 2. Determine Probability of Occurrence 3. Calculate Costs
Research
Publicly available sources
Potential Cost Develop
Ranking Schemes
Company- Specific Input
LOW
MEDIUM
HIGH
Company- specific knowledge Develop
Cost Ranges
Company- Specific Input
LOW
MEDIUM
HIGH
Data on past company expenditure
Research
Factors that affect probability
Probability Multiply by
Estimated Cost
FIGURE 20.2 Cost estimation.
conclusion. This step therefore requires one to be very clear about the project definition and overall purpose of the TCA analysis, including certain goals and constraints on the analysis.
During the second step,streamline the analysis, one refines the first step, including the potential for adding the results of a life cycle inventory or a brainstorming session or two. The main point of this step is to associate sustainability metrics and impact categories with the objectives and other elements of the decision that you are trying to make.
In the third step,identify potential risks, one identifies and then evaluates the relative importance of the impact categories and the associated costs for each alternative or project flowing out of the project definition and scoping. Each alternative or option may have a number of unique risk/cost scenarios based on the cost drivers (e.g., compliance obliga- tions, remediation costs) associated with that alternative or cost driver. It is important to note that this third step may entail several iterations to develop an accurate understanding of the most relevant risk/cost scenarios that are passed on to the next step to be costed accurately.
Once potential risks are identified and evaluated, one proceeds to the fourth step and conducts a financial inventory. The first and easiest task of this step is to collect the type I and II costs from existing internal cost accounting systems. Once these are known, the next task is to evaluate the potential type III, IV, and V costs. It should be noted that this group of cost types is likely to present the greatest obstacles to performing a total cost assessment. One must first struggle to understand which costs drivers of each type are relevant, and once decided, these costs will undoubtedly have significant associated uncertainties, due to the difficulty of establishing their magnitude and probability of occurrence. A considerable amount of effort was taken to provide reliable cost estimates for these drivers as part of the CWRT effort, and these should be consulted and used as appropriate.
For the fifth step, conduct impact assessment, the data collected are analyzed and reviewed. Since the assigned costs that compose the TCA have been collected from very different sources of varying reliability and uncertainty, it is critical that the largest cost contributors in each category are determined and an assessment is made of how that information may best be incorporated into the overall decision-making process. This is something of an iterative process and is, in a sense, a sensitivity analysis for how cost drivers may be affecting the overall results. Although one may have great confidence in type I and II costs, some type III, IV, or V costs, once included, may have a dramatic effect and potentially change the analysis or decision. This will obviously depend on the project or the range of alternatives that are being evaluated and the degree of confidence that one has in the costs that have been collected in these categories. As with any assessment where there is a higher degree of uncertainty, it is useful to include ranges of type III, IV, and V costs for different risk profiles. These different risk profiles might generally represent the high, medium, and low risks for different future scenarios and thereby give decision makers greater comfort with the final cost assessment.
Once the assessment has been completed, it is imperative that youdocument results. As with LCI/A, there are a great many assumptions that are made, and these, together with the final results of the TCA, should be documented carefully. Any use of life cycle information and/or other company-specific data used in the assessment are likely to be critical
components of any defense of the assessment. This also provides an opportunity for identifying best practices and permits accurate data sharing between assessments carried out at different times. It also permits one more easily to update the assessment with new cost elements or revised cost data if required.
Ultimately, one must providefeedback to the company’s main decision loop. It should be recognized that conducting a TCA and obtaining a result from it is not the decision itself, but only one element of the overall decision-making process, which includes many types of information. A TCA is intended to enable a richer discussion of all the potential issues and should, if applied diligently, improve the sustainability profile of any organization that makes use of it regularly.
Example 20.2 A company is interested in making a decision about shipping a phosphorus derivative either by rail or in cans by truck. They have done a life cycle assessment of both means of transportation. What is the cost differential for each mode? What course of action would you recommend?
Solution Because the manufacture of the phosphorus derivative is the same in both instances, a fully burdened cost assessment for that portion of the product is not necessary.
Consequently, you are free to focus on the incremental difference between bulk shipment via rail and shipment in cans via truck. Figures 20.4, 20.5, and 20.6 contain graphical representations of the inputs and outputs, including the additional inputs and outputs via truck. This information has also been put into tables for ease of comparison, beginning with a financial inventory in Table 20.4.
At this point of looking at the inventory, it is difficult to conclude that the differences between the two options are particularly substantial, with the exception of the additional
Product Rail
Shipment Water
31.9 lb 105.4 lb 3.9 lb 84.8 lb 405 lb 15.1 lb
195.4 gal 195.4 gal
Product 100 lbs
100 lb Solid Waste:
228 lb Water Waste:
2 lb Airborne Waste:
391 lb
ORE ROCK LIMESTONE
SAND
COAL OIL NATURAL GAS
FIGURE 20.4 Life cycle evaluation for rail shipment of a phosphorus derivative.
iron scrap required for the cans. When additional information for cans is collected, you find the total differences given in Table 20.5. By scouring the literature and government sources, you find estimates for externalities costs (Table 20.6), and finally, you are able to calculate the total incremental cost for cans (Table 20.7)
These data show that there is an additional societal cost to shipping in cans via trucks.
The cost for hazardous waste is clearly the largest cost and represents an opportunity for risk mitigation or for making the choice to ship via rail. Clearly, the cost to manage and dispose of hazardous waste is going to increase. In addition, transportation costs via truck are likely
Increment for Steel Can Shipment
Other Air Emissions
SOXto Air CO2to Air 0.07 lb
2.8 lb
0.12 lb Resources:
Natl. gas: 0.2 lb Oil: 0.44 lb Coal: 0.3 lb
Steel Can Waste 1.9 lb
Product 100 lb
Iron Scrap 2.2 lb
FIGURE 20.6 Additional inputs/outputs for can packaging and shipping by truck.
Product Can
Shipment Water
31.9 lb 105.7 lb 3.9 lb 85.2 lb 405 lb 15.3 lb
195.4 gal 195.4 gal
Product 100 lb
Solid Waste:
232 lb Water Waste:
2 lb Airborne Waste:
394 lb IRON SCRAP
2.2 lbs.
2.2 lb
COAL OIL NATURAL GAS
FIGURE 20.5 Life cycle evaluation for can shipment of a phosphorus derivative.
to increase as fuel prices increase and as taxes for CO2emissions increase. Overall, your recommendation would be to ship via rail.
Additional Point to Ponder Who is paying the additional costs when the decision is made to ship by truck?
TABLE 20.6 Estimates for Externalities Costs
Pollutant Cost ($/Ton)
Nonhazardous solid waste $35
Hazardous waste $250
Carbon dioxide (CO2) $86
Nitrogen oxides (NOx) $2,500
Reactive organic gases (VOCs) $1,750
Sulfur oxides (SOx) $135
Particulate matter $530
Societal costs ?
TABLE 20.4 Financial Inventorya
Rail Shipment Can Shipment Input
Sand (lb) 31.9 31.9
Coal (lb) 105.4 105.7
Limestone (lb) 3.9 3.9
Oil (lb) 84.8 85.2
Ore rock (lb) 405 405
Natural gas (lb) 15.1 15.3
Iron scrap (lb) 2.2
Water (gal) 195.4 195.4
Output
Solid waste (lb) 228 232
Water waste (lb) 2 2
Airborne waste (lb) 391 394
Product (lb) 100 100
aBasis: 100 lb of product.
TABLE 20.5 Additional Inputs and Outputs from Steel Can Use
Resources Wastes
138,600 lb coal 397,100 lb steel can waste
29,300 lb natural gas 402,000 lb CO2emissions
43,100 lb oil 15,000 lb SOxemissions
294,500 lb iron scrap 63,100 lb solid waste