Product Specific Emissions: PCF, LCA, & CBAM

Why conduct an LCA, PCF, or CBAM. 

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As mentioned earlier, in order to comply with the law, the CBAM methodology  must be carried out for all CBAM goods that are being imported to the EU. Although LCA’s and PCF’s are not mandated by law, there are a myriad of reasons and advantages for conducting one. These include:

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• Competitive advantages -  By performing a PCF or LCA, producers gain a competitive advantage by showing investors, customers, and the public their commitment to sustainability. This provides key market positioning in an evolving environmentally oriented marketplace. 

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• To meet the requirements of buyer  requests - To ensure their supply chain meets some level of sustainability and for transparency purposes, buyers can require that a PCF or LCA be done on the product that they are purchasing. This is especially done when the purchased product undergoes further processing or is to be part of another product as whole. 

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• To meet the requirements of governmental and other grants -  Grants and other funding opportunities from various organisations exist for sustainable development projects. An LCA or PCF is one of the best ways to prove that a project actually has environmental sustainability potential.

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• To set internal environmental reduction targets -  Since LCA’s and PCF’s innately identify processes or products in a supply chain that contribute to the overall environmental impact of a product, they can also be used to model scenarios to reduce these impacts. For example, identifying a supplier in your supply chain  that burns coal in their processes, and who can potentially be switched with an alternative supplier that uses a lower impact fuel. 

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• To obtain permits -  For some companies, in order to obtain an environmental permit for operations, often an environmental impact assessment must be conducted to prove compliance with local environmental regulations. This can  be shown in part by an LCA or PCF.

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• Product design - Increasingly, products are being designed with sustainability and circularity in mind. To know the most sustainable alternatives that can be used when designing a product, a prospective LCA or PCF can be conducted.  

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Differences Between the Methodologies

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Not only are there differences in terms of motivations for conducting these assessments, there also lie key differences between the methodologies they use.

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An LCA is the evaluation of all inputs and outputs and the potential environmental impacts along multiple impact categories (e.g., water use, energy use, climate change etc.) of a product throughout its life cycle. This boundary includes the raw material extraction or harvesting, transportation, production, use, and end of life of the product.

A PCF on the other hand is also based on a life cycle assessment (i.e. shares the same boundary), however unlike with an LCA, a PCF only considers the impact category of climate change. It should be noted that for both LCA’s and PCF’s the system boundary can be narrowed depending on the goal of the assessment and type of product (i.e. if the product under study is an intermediate).

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The CBAM can be thought of as a special kind of PCF. But more specifically, the CBAM is an environmental policy instrument and is designed to support the EU’s climate ambitions and is in alignment with the EU emissions trading scheme (ETS). Because of this, the CBAM methodology presents a stark difference between common PCF’s and LCA’s. Unlike with LCA’s and PCF’s which share the same boundaries or life cycle stages, the emissions captured within the scope of CBAM only include the emissions of the installation producing the product (including the emissions associated with electricity generation). Upstream, downstream, and emissions associated with the transport of materials are not included. There are however certain materials called “precursors” which are relevant to an installation's production process whose embedded emissions (upstream emissions) must be accounted for. Similar to PCF’s, CBAM only considers the impact category of climate change. 

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Guidances and Standards 

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It is essential that these methodologies are carried out in a consistent manner to produce accurate estimates of the environmental impact of a product. Guidances and standards have been developed to aid this endeavour.

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As CBAM is an environmental policy instrument developed by the EU, it contains detailed instructions for calculating instructions that users must adhere to.

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For LCA’s and PCF’s, there exists sector agnostic guidelines such as ISO-14040/44, ISO-14067, GHG protocol, and PACT Pathfinder which helps to standardise the way LCA’s and PCF’s are conducted. The ISO standards broadly specify the requirements for conducting LCA’s and PCF’s, whereas the GHG is a global standardized framework to measure and manage greenhouse gas emissions. The PACT Pathfinder framework builds on existing frameworks and standards (including the relevant ISO standards and GHG protocol) to create alignment between various guidelines.

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However, sector agnostic guidelines are sometimes insufficient for specific industries as they leave a lot of room for interpretation and undermine comparability of the environmental impacts of products. Therefore sector and product specific guidelines have been developed which further build on agnostic standards and are better suited for products and industries for which they are specified, allowing for a more transparent and harmonised methodological approach. Some examples of these are Catena-X for the automobile industry, the aluminum carbon footprint by the International Aluminum Institute, and the GBA GHG rulebook for lithium ion batteries (LIB) and their raw materials. 

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Another example of guidance for conducting a PCF or LCA  is the Product Environmental Footprint (PEF) that was developed by the European Union as a common way of measuring the environmental impacts of goods within the EU. This method also contains PEF category rules (PEFCR) which are similar to sector specific guidelines in that they describe how to calculate the environmental footprint of a specific product group. 

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Since these product category rules (PCR’s) offer specific guidelines for conducting LCA’s or PCF’s for products, they are used to develop Environmental Product Declaration (EPD’s). EPD’s are standardized, verified documents, according to ISO 14025, which communicate the results of an LCA in a standardized way which allow for comparable results between products. 

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Conclusion

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Although LCA’s, PCF’s, and CBAM share similarities, they are 3 distinct metholdogies. LCA’s and PCF’s share the same boundary but PCF’s only focus on the climate change impact category whereas LCA’s cover additional impact categories. CBAM also only considers the climate change impact category, but its boundary is markedly different from that of PCF’s and LCA’s. Furthermore, CBAM is mandated by European law  while LCA’s and PCF’s are not mandated by law, though there are many advantages to conducting them. 

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The different methodologies and number of guidelines for conducting these methodologies can perhaps present confusions. But in summary, if you are importing CBAM goods to the EU, you must carry out CBAM assessments. If you want to measure the carbon footprint of your product, carry out a PCF following sector or product specific guidelines such as PEFCR’s where available, and where not, follow cross-sectoral guidelines such as the ISO-14067. If you want to measure the environmental footprint of your product, carry out an LCA using the same hierarchy or prioritization of guidelines mentioned above. 

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