MePSS Webtool - Tool (Level 4)

Worksheet W16 - E2 Vector
Table of Contents
1. Objective
2. Putting into Practice
3. Implementation
4. Software, templates and other support
5. Call on Resources
6. Literature, examples and background information

Objective Table of Contents
To assess the impacts of introducing new systems at the macro level, especially addressing the rebound effect (i.e.: secondary adverse effects of the PSS).

Putting into Practice Table of Contents

2.1 When and why should this tool be used?

This tool should be applied during the “PSS Development” phase.

2.2 Who should use this tool?

The work should be coordinated by the PSS Champion, who should involve both economic and environmental experts.

Implementation Table of Contents

3.1 How should this tool be used?

Step 1 - Introduction to the concept of the E2 vector

There is a consensus that the economic value generated in society should increase with a few percent per year, while the total environmental load should decrease. This seemingly conflicting combination can only be achieved if on the Macro level the environmental load per unit of value increases. Dematerialisation of growth is a means to achieve this.

If people spend their (limited) income on products with a high price (high value) and a low environmental load, the total environmental load for the society at large is decreased, as the value produced by society at large is decreased, as the value produced by society is not increasing with more than a few percent per year.

The ratio between value and load is called the eco-efficiency ratio, and can be visualised as an E2 vector, where environmental load and economic values are the axis:

The E2 vector can also be used to compare product or product device systems, as has been done in the example on car sharing below.

The left hand figure shows the structure of the E2 vector for the monthly transport before car sharing was introduced. Instead of vectors, boxes are used. The right-hand figure shows the structure of the monthly transport use for the same group of consumers, after they joined the car sharing system, using coloured boxes. For reference, the old situation is plotted in light grey on the background. The long vector is the resulting vector for the reference situation (no sharing), the short vector is the resulting vector for the car sharing. Both resulting vectors have the same ratio between value and load, but the car-sharing vector is shorter. This indicates a win-win situation (lower cost and lower environmental load). Whether this means an improvement on the Macro level remains to be seen, as this depends on how consumer spend the money they save.

We can plot a vector that depicts the alternative use of money that is being saved. We call this the alternative consumption vector. If the Eco-indicator 99 methodology is applied, we can assume the alternative vector has a slope that can be estimated to be 0,05 eco-indicator points per euro spend.

Step 2 - Preparing an E2 vector graph

The vertical axis represents the environmental load. The environmental load can either be expressed according to the main environmental impact identified during the Life Cycle Analysis (e.g.: greenhouse gases emissions, expressed in tonnes of CO2 equivalent) or as a single score, aggregating all the environmental impacts.

The horizontal axis expresses the value of an activity. With value, we refer to the market prices, as the market determines what businesses and consumers are willing to pay for a certain activity. The use of a cumulative value reflects the fact that each supplier in a chain of suppliers adds some value to the product or service.

The procedure for sketching the E2 vector is as follows:

1. Breakdown the lifecycle in a number of products services plus disposal processes. Estimate the costs of these products, services and processes. Plot these on the horizontal axis. Of course not all costs can be estimated very precisely. You may want to indicate error margins, or make alternative versions with high and low estimates. Please make some notes on your main assumptions;

2. Determine which environmental indicator you would like to use;

3. Lookup the environmental load for these products services and processes.

a. Environmental data on products and on processes such as transport, electricity use and disposal can be found in LCA datasets, and for instance the list of indicators in Worksheet 5A – Screening Life Cycle Analysis Input/output data;

b. Environmental data on services, such as financial services, retail, or for instance restaurant services, can be found in input output databases referenced to in Worksheet 5B – Screening Life Cycle Analysis.

4. Plot the environmental load on the vertical axis and draw the vectors. If you want to investigate the uncertainties, try some alternative assumptions.

Step 3 - Interpreting the graphs

This procedure should be done on the reference system and the new PSS system. By comparing results for the two systems, you should be able to recognise one of the following situations:

Situation A: Lower environmental load at (almost) equal value

If the value remains constant, while the environmental load decreases, we can be sure that the system has a positive effect on unlinking. The consumer is spending an equal amount of money for the fulfilment of the requested function in both situations. As there is no financial difference to the consumer, it may be assumed will that there will be no changes in other consumption habits as result of the transfer to the new system.

Situation B: (Almost) equal environmental load, at lower value.

In this situation, we will see that consumers save money, while the environmental load remains constant. In a market economy, the money saved will be spent for other purposes. In next figure we have plotted this "alternative" consumption vector. As a first estimate, this vector could be chosen to have the average E2-angle of day-to-day consumer behaviour.

The picture clearly shows that in this case the total environmental load will increase. This representation illustrates the working of the rebound effect: money saved because of cost reduction will be spent on alternative consumption.

Situation C: Increased value at (almost) equal environmental load

In this situation consumers are prepared to pay extra for the new system, and as a result they will have less to spend on other consumption. This means that the ‘alternative consumption’ vector has an opposite direction. The net effect is that, even as the environmental load for the system itself remains constant, the overall environmental effect is positive as result of the reduced consumption. Of course a consumer will only be prepared to make the extra payment when he sees clear benefits (e.g. PSS that add quality or comfort for instance).

Situation D: both the value and environmental load are decreased in (more or less) the same proportion; the E2-angle remains same.

This fourth situation is quite common in the industrialised Western economies: products and services are both more efficient and cheaper at the same time. Huge environmental gain can often be found in Ecodesign projects. This is the typical win-win situation. Thus, the new system may be expected to gain market share rapidly. If you look at the new system in isolation, it proves to be beneficial for the environment.

In such a situation we cannot see if there is an overall sustainability gain for society. This is determined by the angle of the additional alternative consumption vector in the new situation. If the alternative consumption is less steep than the E2-vector of the reference system, we assume the overall environmental effect is positive, as is shown in next figure. If the alternative consumption vector is steeper, we will see an overall increase of the environmental load.

3.2 Result

The E2 vector assesses the income effect. Although this may be an important driver, since the income is one of the most important limiting factors for consumption, there are also other factors that cause similar mechanisms, such as:

  • Time
  • Space
  • Calories

3.3 Input needed/ data required/ data acquisition process

LCA and lifecycle costing data.

Software, templates and other support Table of Contents

4.1 Software


4.2 Templates and other support

Call on Resources Table of Contents

5.1 Personnel and time needed

The time and number of people needed depends on the context of the project. The minimum amount of time needed is approximately 1 day’s work.

Literature, examples and background information Table of Contents

6.1 Methodological References

Excerpt from “Toolkit for the people, planet and profit assessment of product service systems”, Mark Goedkoop and Carmen Alvarado.