Samfundsøkonomiske gevinster og omkostninger ved grønne produkter

Summary and conclusions

This report is the result of a study for the Environmental Protection Agency 2009-2010 that aimed at developing and testing a method for the comparison of economic consequences of choosing “green products” rather than similar “conventional products”.

The objectives of the study

The aim of the study was to contribute to the development of a methodological basis for an assessment of the socio economic value of buying a green product instead of a conventional one. The objectives are thus:

To develop a method for assessment of economic benefits and costs from consuming a green product instead of a similar conventional variant of the same product. Focus is on the difference between the products, and therefore the gross economic impact in absolute terms has not been estimated.
To do an actual analysis and assessment of economic benefits and costs of choosing specific green rather than conventional products. This analysis comprises the entire life cycle from production, transportation, distribution, consumption and finally disposal.

How are green and conventional products defined?

As a starting point, green products are here defined as products that meet the environmental requirements of the EU and the Nordic ecolabels (the EU flower and the Nordic Swan). The idea was to compare these with conventional products, i.e. products that are the typical products in the market, and which do not meet the ecolabel criteria.

In some instances, it has proven more appropriate to compare products that meet selected, specific environmental requirements with corresponding products that do not, whether or not these requirements are part of the ecolabel criteria or not. The basis for the comparison of products may be established in different ways, and it will often be useful to start with a consideration of the availability of the required data in relation to the definition of green and conventional products to be compared. The availability of life-cycle-analyses may thus be a good criterion to secure the availability of satisfactory data and information on the two products to be compared.

It is obvious that a relevant definition of green products, like the ecolabel criteria, will change over time. Ecolabel criteria tend to develop into general requirements and product standards, which have given them a dynamic impact on the market and thereby make the continuous adjustment of the criteria necessary. The value and relevance of a definition of a green product as one, which meets the ecolabel criteria may therefore vary among product types, and they will further tend to decrease depending on the time elapsed since the latest adjustment of the criteria.

Products included in the analysis

The five products that have been chosen as examples are described and analyzed below. The products are:

Television
Washing machine
Textile services
Copy paper
Office shelving

These products are considered sufficiently different to illustrate a broad range of aspects as wells as environmental and economic consequences of choosing a green product instead of a conventional one.

For each of these, a pair of products, a green and a conventional, have been selected, which are deemed relevant in a purchasing situation. An overview of the selected products and some major characteristics are given in the table below

Economic analysis

For each of the products, the environmental effects of production, use and disposal of the green and the conventional products have been estimated on the basis of existing Life Cycle Assessments. Together with available economic unit costs of environmental impacts and other cost data, the socio economic costs and benefits of choosing a green rather than the corresponding conventional products have been estimated. In addition to that, a financial analysis of costs and benefits of this choice has been conducted. This is e.g. relevant for consumers, procurement officers etc.

Click here to see: Tabel 0.1

The television set is an example of a product where the green version provides significant energy savings that are clearly dominating the less significant additional manufacturing costs.

The green washing machine is characterized by significant additional manufacturing costs as well as environmental benefits and economic savings during the consumption phase. The net result and hence the socio economic value of choosing the green product is however very close to zero.

As a service product, the green and the conventional textile services are defined as the functional unit of providing work clothes for a worker for a year. According to suppliers, the green products are not more expensive than the conventional ones except for minor ecolabel costs, and at the same time, there are clear benefits in terms of cost savings and environmental benefits. The results are positive socio economic net benefits from choosing a green product rather than the conventional one.

In case of copy paper, the choice of a green rather than a conventional product is also socio economically beneficial but in this case, the environmental impacts are the main components. The additional costs of the green products, if any, are very small and confined to ecolabel costs and possible up-front investments (sunk costs). One category of environmental benefits, namely the use of wood from sustainable forestry, is not quantified and included in the calculations.

Office shelves are a product without any significant environmental impact in the consumption phase. There are differences in the manufacturing and disposal phases although they may be small. The office shelves like copy paper is an example of a product where the environmental aspect is dominated by the use of wood from sustainable forests. As this intangible aspect has been considered difficult to measure and valuate, the green product has been defined as products meeting another ecolabel criterion with a potential impact, namely the product durability, and a longer lifetime. This example shows how important the lifetime is for the economic value of a product.

The primary aim of the cost-benefit calculations has been to develop a method for estimation of the socio economic effects of choosing green instead of conventional products, and the specific results of the calculations has not been a purpose by themselves. Still the results of the calculations lead to a few crosscutting conclusions and considerations.

Some limitations to the use of the model and for the calculation of economic effects of environmental impacts in general have been identified. In many cases, the lack of information on emissions and environmental impacts in the reference situation prevents the quantification of environmental effects. In such cases, it must be concluded that there are other potential effects that shall be taken into consideration for an overall socio economic assessment. In other cases, the lack of information on the specific environmental effects and the involved substances makes it impossible to translate the environmental effects into monetary values that may be quantified.

Secondly, it is seen from the calculations that energy savings and related environmental effects are dominating in the estimates of economic values of choosing a green product. Other environmental effects often disappear in the comparison. This may be due to the difficulties in quantifying the environmental effects, and in many cases environmental effects are eliminated when the results of an effective disposal or recycling system has been taken into account. Therefore, the energy consumption will often be left as the only tangible effect. In addition, energy savings are often a key ecolabel criterion, and in many cases, energy is therefore relatively dominating in the definition of a green product.

Some important environmental effects do not appear from the calculations because the use of them is assumed to be the same for the green and the conventional products. A good example is transport and distribution, where it is often assumed that the transport pattern is the same for the two products. Therefore, transport will not be seen as an environmental effect despite the fact that transport may be the most important environmental effect of using both products.

The net effect of choosing a green product is often very limited and other factors than the choice of a green product may be much more important for the environmental impact. In the case of a washing machine it was seen how the value of the green product depends on how water is heated in the specific household where the washing machine is installed. Similarly, the value of lower residual moisture of the green washing machine depends on the energy efficiency of the dryer.

Another parameter of a more general character, which is often more important than the choice of a green instead of a conventional product, is the lifetime the consumer accept before replacing the product with a new version. The method, which has been developed and applied for the above mentioned calculations, may also be used for the further analysis of changes in manufacturing and consumption behaviour. It may e.g. be used for the comparison of similar products with different lifetimes. This is done in the case of the office shelves, where it is seen that a simple extension of the life time of a product may have considerable economic effects, when, compared to other parameters, constituting the definition of a green product.