Environmental Cost Indicator (ECI) – Overview4 min read

The Environmental Cost Indicator (ECI) unites relevant environmental impacts into a single score of environmental costs. What is it used for? How is it calculated?

Luc Hillege

Environmental Specialist at Ecochain

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The Environmental Cost Indicator (short ECI) is a single-score indicator expressed in Euro. It unites all relevant environmental impacts into a single score of environmental costs, representing the environmental shadow price of a product or project.

ECI Shadow Costs

Generally, most of the emissions of a product are not created at a production facility, but along the supply chain. This can be measured by conducting a Life Cycle Assessment (LCA).

Because the environmental data comes from many different sources, the environmental impacts that are measured vary a lot: They all are measured in different impact categories.

For that reason, these numbers can become hard to compare. This is where the Environmental Cost Indicator comes into play: As a single-score indicator, it simplifies and unites different environmental data points into one (monetary) number.

As a result, we are left with one indicator that can be compared across industries.

In this article, you will learn what the Environmental Cost Indicator (ECI) is, what it is used for and how it can be calculated.

Public Procurement with the Environmental Cost Indicator (ECI)

In The Netherlands, circularity and green public procurement are becoming increasingly important. Thus, the results of Life Cycle Assessments (LCA) are gradually being adopted for this purpose.

Recently, results from LCAs are used increasingly in public procurement tenders, especially in the Dutch construction sector. In these tenders, the Environmental Cost Indicator (ECI) is used as important criteria to determine the winning bid.

In The Netherlands, the Environmental Cost Indicator (ECI) is known as Milieu Kosten Indicator (MKI)

How ECI is being used in tenders

Above all, the ECI value ensures that the quality between different contractors can be distinguished.

ECI value ensures that the environmental performance of
different contractors can be compared objectively.”

Discounts through lower environmental costs

By providing an Environmental Cost Indicator for their project, the contractors can receive a fictional discount on their offer. As a result, the offer with the lowest environmental costs receives the highest discount.

Environmental Cost Indicator (ECI) Discounts in Tenders
Environmental Cost Indicator (ECI) Discounts in Tenders

This means that, even if the actual price of the offer is higher, a better environmental performance increases the chance to win the tender.

Maximum ECI for contract requirements

In other cases, ECI values also serve as thresholds, where maximum ECI values are incorporated into contract requirements. Due to that, offers with a low environmental performance get automatically rejected.

Environmental Cost Indicator (ECI) – Calculation in 4 Steps

To calculate our ECI, we need to follow the steps from a Life Cycle Assessment. This is a quick overview of those steps.

Environmental Cost Indicator (ECI) Calculation Process
Environmental Cost Indicator (ECI) Calculation

1. Input data

First, we need to collect the
data on raw materials, semifinished products, processes and energy used in the product or process we are trying to analyze.

2. Calculation of Emissions & Pollutants

Now, we evaluate the emissions these inputs cause – for example CO2,
PO4 and NOx

3. Characterisation into Impact Categories

In this step, we characterize our emission data into impact categories.

Quick Overview: Impact Categories

You can get a more detailed overview on impact categories in our main article: Impact Categories (LCA)

The emissions generated during the life cycle of products and projects are converted into impact categories, such as climate change (GWP) or toxicities. These conversions are based on complex scientific models, which take into account the emissions to air, water and soil, and a number of substance properties such as biodegradability, volatility, solubility, toxic mechanisms and so on.

4. Weighting of Impact Categories

However, with a list of impact scores for a number of categories, comparisons between products may still be difficult or inconclusive. In order to create a single, comparable number like the ECI, the scores need to be weighted and merged.

The environmental impacts are weighted based on the shadow price method. The shadow price is the highest cost level acceptable for governments per unit of emission control (prevention costs).

Environmental Cost Indicator: Example

The weighting of environmental impacts is done by using calculation factors like the ones below.

Impact category Unit Weighting Factor (€/ unit)
Global warming kg CO2-eq 0,05 €
Ozone depletion kg CFC-11-eq 30,00 €
Acidification of soil and water kg SO2-eq 4,00 €
Eutrophication kg PO4 3−-eq 9,00 €
Depletion of abiotic resources – elements kg Sb-eq 0,16 €
Depletion of abiotic resources – fossil fuels kg Sb-eq 0,16 €
Human toxicity kg 1,4 DB-eq 0,09 €
Freshwater ecotoxicity kg 1,4 DB-eq 0,03 €
Marine water ecotoxicity kg 1,4 DB-eq 0,00001 €
Terrestrial ecotoxicity1,4-DCB-
eq
0,06 €
Photochemical oxidant creation (Smog) kg C2H4 2,00 €

In a product, this is what the Environmental Cost Indicator can look like.

In the left diagram, we can see the impact of a beer keg on global warming, measured in CO2-equivalent. In the right diagram, the same data is translated into the environmental cost indicator in euro. We see that the green slice in the right diagram is significantly bigger than in the first diagram – this could lead to the conclusion that effects other than CO2 have a relatively high contribution to the environmental cost of the product.

Beer Keg CO2
Beer Keg CO2
Beer Keg - Environmental Costs
Beer Keg – Environmental Costs

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