Economic Allocation in Life Cycle Assessment

This article examines methods for analyzing allocation in life cycle assessment (LCA); it focuses on comparisons of economic allocation with other feasible alternatives. The International Organization for Standardization's (ISO) guideline 14044 indicates that economic allocation should only be used as a last resort, when other methods are not suitable. However, the LCA literature reports several examples of the use of economic allocation. This is due partly to its simplicity and partly to its ability to illustrate the properties of complex systems. Sometimes a price summarizes complex attributes of product or service quality that cannot be easily measured by physical criteria. On the other hand, economic allocation does have limitations arising, for example, from the variability of prices and the low correlation between prices and physical flows. This article presents the state of the debate on the topic and some hypothetical examples for illustration. A general conclusion is that it is not possible to determine one “best” allocation method. The allocation procedure has to be selected on a case‐by‐case basis and no single approach is suitable for every situation. Despite its limitations, economic allocation has certain qualities that make it flexible and potentially suitable for different contexts. In some situations, economic allocation should not be the last methodological resort. The option of economic allocation should be considered, for example, whenever the prices of coproducts and coservices differ widely.