A guide for those who don’t know (and for those who think they know) the difference between LCA & LCCA.
Who knew one “C” was so important?
There are arguably too many acronyms in our industry. And we get so used to using the acronym that we often forget what it stands for and the meaning behind it.
One of the most common mistakes I hear on calls is people using “LCA” & “LCCA” interchangeably for Life Cycle Assessment and Life Cycle Cost Analysis.
I’ll admit, LCA and LCCA do sound annoyingly similar. But as you’ll see, their meanings are so different from one another that it’s really important to get the distinction right and differentiate between the two.
For that reason let’s quickly define each one before we go into the differences between the two.
Defining LCA & LCCA
What is LCA?
Life Cycle Assessment – or LCA – is a framework to quantify (e.g. tonnes of CO2e, etc.) the environmental impacts of a product or service across all stages of its life cycle.
An LCA uses inputs on the amount of chemicals, water, energy, and raw materials used in each stage of production (resource extraction & processing, transportation, manufacturing, distribution, usage, and disposal). It then quantifies the environmental impacts in terms of various categories, such as:
- Waste water;
- Solid waste;
- Emissions like CO2e;
- Land use;
- By-products; and
- Other releases
Common types of LCA
Some common types of LCA include:
- Cradle-to-grave is the full Life Cycle Assessment from resource extraction (‘cradle’) to use phase and disposal phase (‘grave’).
- Cradle-to-gate is an assessment of a partial product life cycle from resource extraction (cradle) to the factory gate (i.e., before it is transported to the consumer). Cradle-to-gate assessments are sometimes the basis for environmental product declarations (EPD).
- Well-to-wheel is used for transport fuels and vehicles. The first stage (upstream) factors the feedstock or fuel production and processing and fuel delivery. The downstream stage deals with vehicle operation itself (i.e. tailpipe emissions).
Uses of LCAs
Some example uses of LCAs include:
- Understanding the embodied carbon and broader environmental impact of an entire building.
- Comparing embodied carbon of different structural materials in a building (e.g. steel vs. concrete to choose the one with the lowest carbon footprint).
What is LCCA?
Life Cycle Cost Analysis – or LCCA – is the process for evaluating the total financial cost of an asset or investment over its service life.
Life Cycle Cost Analysis goes beyond ‘first cost thinking’ – instead factoring in the total cost of ownership of design decisions. LCCA includes the initial cost (capital expenditure) plus the future costs of the asset like operational costs (e.g. utilities), maintenance costs, repair, and replacement.
LCCA is useful because just focusing on the first cost can create long-term financial risk. For example, a ‘cheaper’, more unreliable & inefficient system can end up being more expensive over 20 years, as well as cause broader business resilience issues.
Because LCCA just focuses on the pure financial impacts of an asset – and the output is in $ – it’s very good for comparing decisions.
Typical outputs of an LCCA are:
- The total cost of the investment – discounted to today’s dollars– shown as a single $ figure;
- Return on investment – shown as %;
- Payback period – shown as # of years to recoup the investment.
Federal requirements for LCCA
Federal Energy Management Program (FEMP) life-cycle cost analysis methods are to be followed by all federal agencies and facilities in evaluating the cost-effectiveness of potential energy and water conservation projects and renewable energy projects in federally owned and leased buildings.
And actually, the latest manual from National Institute of Standards and Technology (NIST) on life cycle costing recommends planners to account for the non-monetary impacts of building design, by including the environmental impacts or externality costs faced by society. For more information on this, read our blog on life cycle cost-effectiveness.
Uses of LCCA
Some example uses of LCCAs include:
- Quantifying the total cost of a building over its intended lifespan.
- Deciding between three different HVAC retrofit alternatives — each with different upfront costs, energy implications, and useful lives. based on total cost of ownership.
What is the difference between LCA & LCCA?
LCA and LCCA serve different purposes and they are not substitutes for one another. They each answer different questions. It is important you do not confuse them:
- LCA answers the question, “what is the environmental impact?”.
- LCCA answers the question, “what is the total cost of ownership?”.
The difference between LCA and LCCA is that LCA attempts to quantify the environmental impact of a product across each stage of its life, whereas LCCA estimates the pure financial impact over the life of the investment.
Some of the key differences between LCA and LCCA are summarized in the table below.
|Question it answers||What is the total cost of ownership of this asset?||What is the environmental impact of this product from extraction to disposal?|
|Quantitative||Yes - purely financial.||Yes - certain environmental impacts quantified but not monetized.|
|Focus/scope||Narrow - purely through a financial lens.||Holistic – assesses a broad set of environmental impacts.|
|Decision support||Easy to compare alternatives as metrics and underlying data are in $.||Difficult to assess merits of an option that saves CO2 but increases waste water as metrics differ.|
Can we combine LCA & LCCA to get the best of both worlds?
LCA and LCCA are both useful frameworks in their own right to (1) help understand the impact of investments, and (2) to compare investments – they just do it through different lenses.
Ultimately, done on their own they can provide helpful, but limited, information.
For example an LCA quantifies the environmental impact of a decision, but nothing of the financial implication, whereas an LCCA does the opposite.
However, decision-making can be improved if the two ideas are combined – i.e. that of using (1) a financial lens, and (2) quantifying the broader lifetime social & environmental impacts of an investment.
This is where Cost-Benefit Analysis is a great tool.
Cost Benefit Analysis
Cost Benefit Analysis is a sustainability business case framework to quantify in dollar terms the financial, social, and environmental impacts resulting from an investment.
CBA expands LCCA by looking at the environmental & social costs and benefits of a decision, as well as pure financial impacts.
CBA expands LCA by monetizing the environmental & social impacts so their significance can be put into a LCCA framework that decision-makers understand.
Because everything in a CBA is in $, the analytics can be used to:
- Build a business case for sustainability in each project early on – aligning strategic environmental and operational goals with economic value;
- Tradeoff competing investments and to promote cost-effective decisions,
- Communicate the holistic value of sustainable and resilient design.
Uses of Cost Benefit Analysis
Some example uses of CBA include:
- Quantify and monetize the financial, social, and environmental impact of an entire building, including: LCCA, embodied carbon, operational carbon, occupant health, air pollution, etc.
- Compare embodied carbon vs. life cycle costs of different structural materials (e.g. steel vs. concrete) to choose the most cost-effective one.
- Deciding between three different HVAC retrofit alternatives based on total cost of ownership and operational carbon.
Is cost benefit analysis hard?
CBA sounds hard to do, but it is possible with just a few clicks.
Autocase has developed an online tool that automates cost benefit analysis for buildings. Users simply enter some basic design data, then Autocase uses its peer-reviewed research and location-specific social costs to monetize the financial, social, and environmental impacts.