Eco-Efficiency Assessments as a Tool for Revealing the Environmental Improvement Potential of New Regulations

Sustainability 2010, 2, 117-126; doi:10.3390/su2010117 OPEN ACCESS sustainability ISSN 2071-1050 www.mdpi.com/journal/sustainability Article Eco-Efficiency Assessments as a Tool for Revealing the Environmental Improvement Potential of New Regulations Ottar Michelsen The Industrial Ecology Programme, Department of Energy and Process Engineering, Norwegian University of Science and Technology, NO 7491 Trondheim, Norway; E-Mail: ; Tel.: +47-73-598719; Fax: +47-73-593580. Received: 11 November 2009 / Accepted: 17 December 2009 / Published: 5 January 2010 Abstract: Public regulations can result in improved environmental performance of products. In this paper eco-efficiency is used to assess the most likely outcome of potential new regulations. The paper presents a case study of furniture production in Norway where different scenarios for improving the environmental performance of the products are presented. Four regulatory options for imposing environmental improvements are assessed; (1) an introduction of a tax on emissions, (2) an increase of the tax on landfills, (3) an introduction of a tax on raw material consumption, and (4) introduction of take-back legislation. Keywords: eco-efficiency; regulations; LCC; environmental performance 1. Introduction A range of concepts and ideas are introduced to enable sustainable development and eco-efficiency is by many seen as a central idea [1,2]. Eco-efficiency is seen both as a concept and as a tool where the basic idea is to produce more with less impact on nature, measured as reduced emissions or reduced raw material consumption, or both [3,4]. The concept of eco-efficiency has developed quickly since it was introduced and measures of eco-efficiency are used at different scales, both temporal and spatial [2,4]. In addition to encouraging more efficient use of resources, two distinct areas for eco-efficiency assessments can be identified; as a tool to measure performance at a system level (process, product, company etc.), and as a tool to Sustainability 2010, 2 118 compare different alternatives (benchmarking). In both situations the underlying motivation is to improve business performance. Much research is done on what motivates business to put environmental issues on the agenda [4-10]. The findings can be summarized in four distinct drivers; consumer pressure, potential cost savings, legislation, and ethics. As eco-efficiency has developed, the focus has primarily been on exploration of potential cost savings. However, eco-efficiency has a great potential also for assessment of the potential in (new) regulations. Several authors claim that authorities should set targets for environmental improvements, while the industry should be given the opportunity to decide how these targets should be fulfilled to ensure maximum opportunity for innovations [11,12]. Measures on eco-efficiency can be useful here. The environmental dimension can be used to assess whether environmental improvements are met (e.g., 10% reduction of greenhouse gasses), whereas the value dimension can be used to assess the probability for changes in the products and production processes. Cropper and Oates [13] focus on the two-step process necessary for reaching the environmental goals; first the targets for environmental quality must be set, and then a regulatory system must be designed and put in place to monitor the achievement of this target. In this paper the potential influence possible new regulations could have on a case study of furniture production in Norway is explored. Different scenarios for improvements in environmental performance are presented and the economic consequences of these for the manufacturer and/or customer are analysed. This is combined with possible new regulation where the potential for initiating environmental improvements as a consequence is explored. 2. Background It is commonly acknowledged that companies do what is profitable, either in a short or long term perspective or, preferably, both [14]. This is often not congruent with the most environmental friendly options [15]. As a consequence, the present market is not able to cope with all environmental challenges and as a profound example Nicholas Stern [16] concluded that climate change is the greatest market failure the world has ever seen, and it interacts with other market imperfections. Even environmental improvements that generate cost savings, tend not to be implemented if there are large investments involved and the savings has a long term perspective [4]. Investments will then be allocated elsewhere and the eco-efficiency potential will not be realised. Regulations have the potential to change the eco-efficiency performance of products and new regulations can thus motivate alterations within existing production systems. New and more environmental friendly solutions can become profitable if the regulations are adequate formulated. Two distinct types of regulations can be identified, namely public (juridical) regulations and regulations imposed by the industry sector themselves [17]. Here the focus is on public regulations. Bleischwitz et al. [15] identify three policy levers in the materials cycle where public regulation can impose changes in the environmental performance; (1) taxation on raw materials, and licenses to operate and agreements on exploitation of raw materials, (2) integrated product policy (IPP) and quotas for recycled inputs, and (3) regulation on landfills, pollution taxes, taxes on emission from incineration and technical standards for end-of-life treatment. Sustainability 2010, 2 119 With present environmental and financial challenges, there seems to be a need for more regulations and in particular regulations that are tailored to impose environmental improvements [18,19]. Dahlsrud [19] have studied different industries and concluded that even companies with high norms on social responsibility will not go far beyond regulations if this will generate extra costs. The conclusion is that new regulations are vital to generate changes that are needed for sustainable production and consumption patterns. Eco-efficiency assessments of the potential of new regulations can here be useful, using eco-efficiency as a strategic tool [20]. In this paper the focus is on how to actually figure out how such regulations could be formulated. 3. Case and Methodology Michelsen et al. [21] performed a case study on environmental performance of six different models of conference chairs. The flagship model of one of the producers involved turned out to have the highest environmental impact of the analysed models. The main use of the chair is in conference rooms, waiting rooms etc, and has a total weight of 6.81 kg. It is assumed by the manufacturer that the product can be used for 20 years. Table 1 shows the main components of the chair. In addition, 3 kg of cardboard is used for packaging. Table 1. Main materials in the case chair. Component Steel frame Beech plyw (...truncated)