Harnessing the End-of-Life Formula
May 21, 2015 by Bo Weidema
The so-called End-of-Life formula has received a lot of attention lately. Currently, public commenting is open for the first “Environmental footprint” pilot drafts that use the 50:50 End-of-Life formula of the EU PEF Guideline (EU 2013).
The End-of-Life formula is an attempt at dividing the benefit of recycling between the suppliers of scrap and the users of scrap. The 50:50 formula divides this benefit equally between the two.
The main criticism of the formula is that this does not reflect how recycling markets work in real life, and the use of the formula therefore leads to misleading information and perverse incentives to the market actors:
- The PEF 50:50 End-of-Life formula implies that demanding scrap will result in an increase in the amount available for recycling corresponding to 50% of the demanded scrap, and will give the user of scrap an equivalent credit for reducing the need for virgin material. The only way this can reflect real life is by assuming that a demand for scrap stimulates a marginal change in market price for scrap, leading to exactly 50% increase in supply.
- Likewise when sending scrap to recycling, the PEF 50:50 End-of-Life formula implies that only 50% of this will be recycled. Again, the only way this can be understood is by assuming that the increased supply of scrap leads to a marginal decrease in price, causing exactly a 50% reduction in supply of scrap from other actors on the market.
The problem with the 50:50 EoL formula is that it tries to combine two distinct market situations into one formula:
- The first part of the EoL formula (involving R1: the amount of scrap demanded) is relevant in a market situation where there is a surplus of scrap available. In this situation, an increase in demand for scrap will lead to more recycling (equivalent to the entire additional demand and not only 50%), while supplying more scrap will only increase the need for disposal of the surplus.
- The second part of the EoL formula (involving R2: the amount of scrap supplied to recycling) is relevant in a well-established recycling market where all collectable scrap is already recycled, and increase in demand for scrap therefore cannot cause any increase in the amount of scrap available, while sending material to recycling will lead to an equivalent (not only 50%) increase in recycling.
The attempt to place both situations into one formula is what causes the problem.
But the problem has a solution: An alternative, more realistic approach is already provided in the PEF Guide (EU 2013) since it requires that “wherever possible, subdivision or system expansion should be used to avoid allocation. (…) System expansion refers to expanding the system by including additional functions related to the co-products”, corresponding to the normal consequential modelling as described in ISO 14044/49. System expansion corresponds to using the first part of the End-of-Life formula (with 100% credit to the user of scrap) in a market situation where there is a surplus of scrap available and the second half (with 100% credit to the supplier of scrap) when all collectable scrap is already recycled. In this way, system expansion provides an incentive for using scrap when the market for the material in question is decreasing, and for supplying scrap when the market is expanding, which is exactly what is needed to increase recycling in these two respective situations. When the recycling rate is below its environmental optimum, the system expansion procedure furthermore gives credit for specific actions that increase recycling capacity. For details on this modelling and its rationale, see Chapter 5.7 in Weidema (2003).
Since allocation can always be avoided by subdivision or system expansion, as demonstrated in the ecoinvent system model ‘Substitution, consequential, long-term’, the quoted PEF Guide requirement actually makes superfluous the more elaborate End-of-Life formula for recycling allocation. Using system expansion only for some by-products and the End-of-Life formula for what is seen as situations of recycling would create an inconsistency in the system models, and can therefore not be intended (furthermore, no definition is given in the PEF Guide as to when when the use of a by-product should or should not be seen as a case of recycling).
The good news is that on an EU workshop on the topic, held on October 6th 2014, Michele Galatola, team leader of the PEF pilots, stated that “During this part of the pilot phase (1st wave pilots screening studies) we want to gather as much knowledge as possible on the pros and cons of using the “single formula” approach. If the results gathered from the screenings convince us that the single formula will never work, then we might consider to test in the second part of the pilot phase an alternative approach…”
Another good news is that Wolf & Chomkhamsri (2014) have succeeded in elegantly re-formulating the most important parts of the above-described long-term consequential modelling principles into a new encompassing formula that they call “The integrated formula”, and that this has already been recommended by the PEF pilot on metal sheets (Eurometaux 2015).
It looks like the stray End-of-Life formula is slowly being reined in.
References:
EU (2013). Product Environmental Footprint (PEF) Guide. Published April 9th as annex II to the Commission Recommendation on the use of common methods to measure and communicate the life cycle environmental performance of products and organisations.
Eurometaux (2015). Product Environmental Footprint Category Rules (PEFCR) for “Metal Sheets for various applications”. Revision 0.4 29/04/2015
Weidema B P. (2003). Market information in life cycle assessment. Copenhagen: Danish Environmental Protection Agency. (Environmental Project no. 863) https://lca-net.com/p/1078 Chapter 5.7. on Recycling.
Weidema B P. (2013). Guide to interpret the EU product environmental footprint (PEF) guide. Aalborg: 2.‑0 LCA consultants. https://lca-net.com/p/235
Wolf M-A, Chomkhamsri K. (2014). The “Integrated formula” for modeling recycling, energy recovery and reuse in LCA. White Paper. Berlin: maki Consulting & P.P.P. Intertrader.