A methodological improvement for assessing petrochemical projects through life cycle assessment and eco-costs

Abstract

As the debate on how to effectively link life cycle analysis (LCA) and negative externalities of the products or processes is still unsolved, an improved methodology that involves the private and social (environment) profitability to petrochemical projects in Mexico is presented. We incorporate both environmental impacts, identified through the LCA, using the eco-costs model, within a project appraisal analysis. The eco-costs are a single LCA-based indicator of environmental burden, based on the concept of marginal prevention costs, i.e. costs required to bring back the environmental degradation to a sustainable level. The methodology was carried out in four steps. First, the potential environmental impacts (in physical units) were assessed through life-cycle assessment. Second, the marginal prevention costs of pollution (eco-costs) of impact categories were estimated. Third, since these monetary values are given for a European income level, eco-costs were adjusted to Mexican income levels (i.e., benefit transfer). Fourth, these adjusted values were used for assessing the financial viability of two petrochemical projects at two stages of installed capacity. The costs of marginal prevention (eco-costs) changed from 1.62 USD/kg of acrylonitrile in the old design to 0.926 USD/kg in the redesign. In case of vinyl chloride monomer (VCM), the eco-costs were from 16.08 USD/kg of VCM for the stage design to 1.62 USD/kg for the operational stage (ex post). The sensitivity analysis identified that only 15 % of these eco-costs, in the case of acrylonitrile, and 1.5 % for the VCM, could be incorporated to the costs of the project without affecting the profit on the investment. The developed methodology was helpful to express potential environmental impacts in monetary units as financial indicators in a project appraisal. Thus, the methodology can be used to internalize the eco-costs into product prices, shifting the financial burden to firms and consumers, in order to offset the high costs of the green net national product.