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Cost-Benefit Analysis for EU GPP criteria

Application to Office IT Equipment

Meeting of the EU GPP Advisory Group

Stockholm, 29th April 2015

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Joint Research Centre, Institute for Prospective Technological Studies (IPTS)

• JRC/IPTS and DG ENV initiated this exploratory work on the

quantification of the impacts resulting from the adoption of EU

GPP criteria motivated by a previous request by the EU GPP AG

in that direction.

• The goal of the project is to provide information to procuring

authorities that allows them a better understanding of the true

impacts of their procurement decisions.

• We understand this as a tool to better justify the use of the EU

GPP criteria, for individual procurers but also at a policy making

level.

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Motivation and Objectives

Motivation and Objectives

1. Define a baseline scenario (this should correspond to the case in which

procurement is carried out without any regard for GPP criteria).

NB: In practice, the definition of the baseline can be extremely challenging due

to lack of good market data.

2. Assess the effect of adoption of EU GPP criteria in terms of net

changes compared to the baseline previously defined.

• Costs: excess life cycle costs borne by the procurer in relation to the

baseline (not uncommon to be negative in Life Cycle perspective)

• Benefits: avoided externalities (or decreased environmental impacts) in

relation to the baseline.

NB: This modelling can involve a significant degree of “educated guesswork”,

which is necessarily reflected in an increase in uncertainty (more on

uncertainty ahead).

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Procedure guidelines 1

The following guidelines have been set:

3. Both costs and benefits should be calculated in a Life Cycle

perspective:

• Cradle phase (covering purchase and other initial costs from the

“costs” side and cradle-to-gate environmental impacts from the

“benefits” side)

• Use phase (maintenance and operation costs and impacts,

including energy consumption)

• End-of-Life (EoL) phase.

4. Both costs and benefits should be calculated in a “per annum” basis

so that products with different longevities can be meaningfully

compared.

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Procedure guidelines 2

The following guidelines have been set:

5. Perform the analysis for each set of criteria that aims at achieving the

same objective, e.g., if several criteria are intended to increase the

lifespan of the product, then the effect of these criteria should be

analysed collectively.

6. Perform the analysis on the basis of one unit of the purchased product.

7. Perform an independent analysis for core and comprehensive criteria.

8. Perform the environmental analysis in a way consistent with the

methodologies developed in the Commission.

9. Benefits should be evaluated using a full monetization approach (this

was developed specifically for this CBA for EU GPP project).

10.Uncertainty should be built in into the modelling at a root level and

should allow for the expedite calculation of the best estimate and of the

lower and upper bound of the confidence interval (this was developed

specifically for this CBA for EU GPP project).

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Procedure guidelines 3

The following guidelines have been set:

7 6 May 2015

Costs, Benefits, TCO and LCC

Life Cycle Costs (LCC)

Total Cost of Ownership (TCO): borne by the Contracting

Authority

Acquisition costs (e.g.,

Price)

Operation and Maintenance costs (e.g.,

Energy)

End-of-Life costs

Environmental Externalities:

borne by all

Cradle-to-Gate environmental

impacts

Use phase environmental

impacts

End-of-Life environmental

impacts

The difference in this, in relation to the

baseline, will be called "Cost". Can well be

negative if the environmentally sound solution is actually cheaper.

The decrease in this, in relation to the baseline,

will be called "Benefit". It is expect to always be

positive, as every scenario analysed should represent

an environmental improvement in relation

to the base line.

It is one of the product groups with better market data available (and even so we were faced with difficulties related to lack of data).

It is currently undergoing revision.

It is a product group of generalized interest for every field of activity and of obvious horizontal relevance

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Test Case

It was decided to test the procedure for the product group Office IT Equipment for several reasons, namely:

Office IT Equipment criteria set

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Energy

Consumption

Hazardous

SubstancesLifespan Ruggedness Recyclability

Core 1

Comp 2

Core 3

Comp 4

Core

Comp 5

Core 6

Comp 7

Core 8

Comp 9

Core 10

Comp 11

Core 12

Comp 13

Core 14

Comp 15

Core

Comp 16

Core

Comp 17

Core 18

Comp 19

Core

Comp 20

Core

Comp 21

A1Minimum energy performance

for computers1 X

X

2 X

4 X

B3 Plasticisers in external cables3

X

6 X

C2Continued availability of spare

parts5 X

13

D3 Product dismantling potential12

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D1Recyclability of plastics casings,

enclosures and bezels10

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C4Ease of replacement for

rechargeable batteries7 X

Rechargeable battery life and

enduranceC78

Minimum energy performance of

monitors

X

Technical Specifications

X

D2Marking of plastic casings,

enclosures and bezelsX

X

D4Provision of an end of life

management service by a X

C9 Notebook durability testing

C3Design and support for

reparability

C1 Warranty and service agreements

A2

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Baseline

Desktop Monitor Laptop

Off 37% 36% 27%

Sleep 36% 34% 43%

Active 27% 30% 30%

A - B

620 201 1242

6 6 5

425 0 425

95 0 95

278 0 368

3 - 3

91.3 - 195.6

- - 950

- - 550

- - 9.5%

120 60 61

Discount rate (%) 3%

Electricity price (€/kWh) 0.18

Support costs increase from yr 3 (€/yr²)

Cost of accident (€)

Cost of physical repair (€)

frequency of accidents (yr-1)

Electricity consumption (kWh/yr)

Lifespan (yr)

Commissioning costs (€)

Retiring cost (€)

Initial Support costs (€/yr)

Support costs increase transition (yr)

Baseline

Usage

Ecodesign category

Price (€) Desktop Monitor Laptop

Initial costs (€/yr) 174 (31%) 33 (75%) 333 (36%)

Support costs (€/yr) 357 (62%) 0 440 (48%)

Accidents costs (€/yr) 0 0 117 (13%)

Electricity costs (€/yr) 22 ( 4%) 11 (25%) 11 ( 1%)

Use phase costs (€/yr) 379 (66%) 11 (25%) 568 (62%)

Disposal costs (€/yr) 16 ( 3%) 0 19 ( 2%)

Total costs (€/yr) 569 44 920

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Cost-Lifespan connection

Co

st

time

Support costsExperience tells that these costs (which include both user and IT personnel hours) start climbing quite a lot after 3 years.

Total cost of ownership

Electricity costs: really low!

EoL

Accident

Initial costs

3 years

It is assumed that a computer will be retired when its TCO is at a minimun. This is the computer's lifespan in the absence of accidents.

If an accident happens not long before the computer's economically optimum time of replacement it does not pay to repair it, but rather to replace it. This reduces the computer lifespan.

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Energy C

ost

s/im

pac

ts

time

Support costs

Total cost of ownership

Electricity costs and impacts

EoL

Initial costs

3 years

Energy criteria group: Reduce this.

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Lifespan C

ost

time

Baseline support costs

New total cost of ownership

Electricity costs

EoL

Initial costs

3 years

New support costs

Baseline total cost of ownership

Lifespan criteria group:Cause this shift.

Increased life spaninduced by the

reduction in support costs.

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Ruggedness C

ost

time

Support costs

Total cost of ownership

Electricity costs

EoL

Accident

Initial costs

3 years

Ruggedness criteria group: Reduce the probability of this.

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Recyclability C

ost

s/im

pac

ts

time

Support costs

Total cost of ownership

Electricity costsEoL costs

Initial costs

3 years

Recyclability criteria group: Create a negative EoL impact.

EoL impacts

Example for a laptop computer

6 May 2015 16

Preliminary CBA results

Foreseen difficulties of the approach for other product groups:

Lack of sufficient market data

Lack of adequate benchmarks

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Future steps

Model of monetization of environmental impacts must be calibrated and

fine-tuned.

Modelling of monetization of environmental impacts must be scientifically

formalized.

Future steps:

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Thank you miguel.gama-caldas@ec.europa.eu