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INTRODUCING OPPORTUNITY COST PRINCIPLES TO THE

APPLICATION OF LIFE CYCLE ASSESSMENT (LCA) FOR
DECISION MAKING IN AGRICULTURE.

Daniel Berlina and H-E Uhlin ß

Abstract
Life Cycle Assessment (LCA) is increasingly used as the basis for decisions related to the
environment, or application to products using natural resources as important inputs. This
method is product related and basically for operative short-run decisions. Being, at the same
time, a tool for how to relate environmental impacts to production make s the method often
interpreted as holistic, long run and strategic. This study originated with the recognition of
the limitations of using the now established LCA method for environmental policy and
strategic decision-making in agriculture and thus the possibility of unwise applications and
uses. Incorporating another methodology, the opportunity cost principles, with LCA to give
more relevant outcomes and suggest additional options was considered a logical development
worthy of investigation.

Using the product itself as a basis for the functional unit a product context for the definition
of system boundaries may give both false indications of total environmental impacts and
become a barrier for environmental decision-making. The comparative analyses docume nted
in this study demonstrates the variance that emerges when a conventional LCA method is
applied to products produced using different technologies, as well as differing outcomes
using the joint application of LCA and the Opportunity Cost (OC) concept. T hese variances
are illustrated with reference to a case study comparing organic and conventional milk
production.

The application of an LCA-OC method of environmental impact assessment suggests that

extensive organic farming may result in higher outputs considered potentially deleterious to
the environment, than more intensive conventional methods usually regarded as
environmentally unfriendly. The case study used shows that a farm system for organic milk
will release a significant amount of greenhouse gases. By contrast a farm system for
conventional milk, when OC effects of surplus land are taken into account, is shown to have a
potential of binding a significant net amount of greenhouse gases.

1 Introduction

The environmental impact of food production is a major issue due to a rapidly growing
population and an increased pressure on earth’s life supporting systems. Improving the
efficiency of resource utilisation in food production and to minimize emissions and other
environmental effects are vital. LCA is one method that has gained much attention and is
regarded as an important tool for environmental policy and strategic decision-making (e.g.
Wegener Sleeswijk et al 1996; Audesly et al 1997; Ceuterick 1998; Haas el al 2001).

a
D B graduate student, Department of economics, Swedish University of Agricultural Science, Uppsala
ß
HEU Prof-business management, University of Gävle
LCA is considered to cover the total production chain “from cradle to grave” (Anon 1997). It
focuses on physical flows of energy and material. The production chain, or the technological
system, investigated is delimited from the surrounding environment by system boundary. The
energy and material flows crossing the boundary are accounted for as: inputs, i.e. resources
used for production, transportation etc, and outputs, i.e. emissions and waste leaving the
product system entering the surrounding environment. Environmental impacts apply to
resource use, human health and ecological effects.

However, the industrial production process assessed in a classical product-LCA does not
properly apply to the food production process (Haas el al 2000). Primary agriculture
producing raw material for food production differs from industrial production through
extensive use of biological processes. Using renewable resources and nature’s own processes
make agricultural production no pure cradle to grave process. The use of resources, such as
land, thus differs from the classical product-LCA assumption of “consuming resources”.
Land will not disappear due to agricultural production; rather, it may leave the system with
properties – for example long-term fertility of the soil, biodiversity, wildlife habitats and
landscape image – which differ from those at entry (Cowell and Clift 2000). The use of land
has also, in contrast to other human-made inputs, different functions in biological systems. It
is an essential input in the production chain as well as a vital part of nature, a condition of
importance both in relation to the methodology of LCA and to the improvement of resource
efficiency and environmental performance of agricultural production. For the first, the LCA
methodology requests a clear boundary between the technological system and nature. As land
fulfils both an economic and an environmental function the distinction between those systems
is diffuse and hard to establish (van Zeijts et al 1999). Secondly, there are, in the light of
resource use and environmental impact of agriculture, different land use opportunities; a
strategic choice between on the one hand employ methods that reduces land use and on the
other hand use cultivation methods that demands more land but less of other inputs.
Production systems that rely on to the farm imported inputs such as fertilisers and pesticides
releases land. This redundant land has alternative uses: uses that in turn can have
considerable effects on the environment.

Extensive efforts have been made to apply and adjust LCA methodology to agricultural food
production (e.g. Weidema el al 1995; Ceuterick 1996; 1998; Wegener Sleeswijk et al 1996;
Audesly et al 1997; Mattson 1999). Land use impacts of primary agriculture have been one
major issue in these efforts. Usually, this research concentrates on developing frameworks for
incorporating the qualitative aspects, such as long-term fertility, of land use (see Lindeijer
2000 for an overview). Land use impact also relates to the definition of system boundaries. In
order to account for the effects on terrestrial ecotoxity it is recommended, following the
classical product-LCA approach, that agricultural land always should be considered as part of
the environment (Wegener Sleeswijk et al 1996).

The choices made of applying different methods in primary agriculture (indirectly this also
relates to different agricultural policy choices) or any other industrial sector using land as a
production factor implies choices of different land use. The classical product-LCA approach
does not, however, include the alternative use of redundant and related effects on the
environment (Ekvall 1999). In fact, the alternative use of land area and its effect on the
environment has seldom been included in LCA studies of agricultural products or in studies
of forest products, thus neglecting to illustrate possible environmental and time related
conflicts involved in different land use.

2
A central aim of industrial ecology is to “interpret and adapt an understanding of the natural
system and apply it to the design of the man-made system” as a mean to stay within
environmental constraints (Hardin and Tibbs 1992). The ultimate goal of industrial actions is
to produce marketable goods and services using the least expensive input combination.
Wasting potentially valuable input will in the long run be an untenable situation both for
society and individual organisations. A classical LCA-method may be understood as an
approach that tries to optimize resource use and minimize environmental effects for both
subjectively defined and narrow systems solely based from the viewpoint of a given product
or service. The use of economic principles and pricing of resources is rarely used and also
disputed. Within the field of environmental economics, it is now well established that the use
and abuse of natural resources is not fully recognised in the market. Externa lities are present
in the pricing of the quality of natural resources and unclear definitions and applications of
property rights.

In this study we argue that the conventional LCA has problems of handling decisions
involving choices of different use of a renewable resource, land, in a strategic economic
context combining the natural system aspects with the man-made system at different system
levels such as product, industry and society. This is an important shortcoming due to an
increasing use and popularity of LCA. The concept of incorporating another methodology,
opportunity cost principles, with LCA to account for the alternative use of land and thus give
more realistic long term outcomes and suggest additional options are therefore considered as
a logical methodological development worthy of investigation. The objective of this paper is
to describe and explain the role and meaning of opportunity cost principals in the Life Cycle
Analysis framework and its implications for strategic – land use related – decisions in
agriculture. The significance of the LCA-OC method will be illustrated through the use of a
published classical LCA case study (Cederberg and Mattson 2000) comparing a conventional
and an organic milk production system delivering the same amount of milk. Thus we are
applying a well-known method for testing a theory by trying to falsify expected outcomes; a
promise from the LCA method of being an instrument for choosing more environmentally
friendly systems of production. Our hope is that this study will induce a further discussion of
possible and needed methodological developments of the LCA method for use in industrial
ecology.

2 Different applications of LCA: strategic versus operative dimensions

Initially developed for assessing material and energy flows of industrial products LCA has
become a popular method with a wide range of applications, e.g. identification of
improvement possibilities, choice of environmental performance indicators, market claims,
and decision-making (Anon 1997). The main potential of LCA, in comparison to other tools
for environmental decision-making, is considered to be that it relates environmental burdens
and impacts to all stages of a products life cycle (Azapagic and Clift 1999). By relating
environmental issues to the whole production chain the method is regarded to have a holistic
system-level approach well suited for assessments of complex systems. The most frequent
applications of LCA related food production and primary agriculture is as a supportive tool in
operative and strategic decisions (Ceuterick 1998). The main goal with the operational type,
which also follows the original purpose of an LCA, is to identify “hot spots” and
environmental improvement options in a products´ life cycle. This application is specific in
its character, meaning both geographical area and the range of products and interest groups
affected. It is also short-run in character and principle content; the products and general

3
circumstances are taken as given. The strategic use on the other hand takes an even more
holistic approach involving comparisons of alternative product combinations, production
systems, and a wider consideration of stakeholders. The main purpose of such an application
is to determine the differences in recourse use and environmental impact between different
systems with at least one main equivalent function. The information provided by the LCA in
these cases is supposed to give some answers to the fundamental question of what alternative
to choose, i.e. identifying the alternative that maximizes environmental performance (Krozer
and Vis 1998). This application is more generic, affecting a wider geographical area,
products, stakeholders and has a longer time horizon. Thus, the strategic application has a
broader perspective needing to consider environmental, economic, social issues, and
available technologies.

Accordingly, in the strategic application there is a variety o underlying constraints. A number

of considerations and choices between alternatives have to be made. The direct use of limited
resources, such as land, will lead to a choice between different use alternatives. If all
recourses were unlimited and all options were available to us the problem of choosing
between alternatives would not exist. However, most resources are limited and this forces us
to make choices and choices entail sacrifices, namely the sacrifice of the alternative not
chosen – the opportunity cost. In other words it is the benefit or the value of the opportunity
forgone that constitute the opportunity cost. Hence, the opportunity cost does not necessarily
need to be expressed in monetary terms.

An issue of great strategic importance, needing special consideration in LCA of agriculture

production, is land (Mattson et al 2000). Land is an important resource and input in
agricultural production as well as a source for bio-energy production, fibre for clothing, raw
material for industry, and as a sink for anthropogenic emissions. The visual effect of land use
can also be of value in social terms. People might appreciate and give value to the rural
landscape (Mattson et al 1999). Different use of land is associated with different benefits but
also with costs. In a decision-making situation the cost of employing a given asset can
according to the opportunity cost principles be established by estimating the highest-valued
opportunity that must be foregone. The most appropriate measure when calculating the
opportunity cost of different land use is accordingly the utility that could be derived from an
alternative use. This may often be expressed in monetary terms but the utility of different
land use can also be expressed in for example reduced amount of green house gases released.

A decision-making process involves a comparison between the cost and the benefits resulting
from various decision alternatives (Hirschey & Pappas 1993). An LCA that serves as a
policy-formulating or strategic decision supportive tool, have to consider different uses of
land and the related benefits and costs. Due to the trade-off between inputs like fertilisers,
pesticides, and arable land, the impacts of land use are specially important in LCA
comparisons between intense production of milk (conventional), and less intense production
of milk (organic). While conventional milk employs chemical pesticides and commercial
fertilizers’ organic milk rely on well-balanced crop rotation, biological treatment, and careful
use of manure. As a result of imported inputs conventional production use less land than
organic production per unit of milk (Cederberg and Mattson 2000). In the conventional
system there is accordingly area that can be allocated to other cultivation options or for other
use. Cederberg and Mattsson (2000) suggest that a larger use of arable land, especially for
grassla nd, in the organic system actually promotes regional and national environmental goals
and that the issue of alternative use of land therefore can be ignored.

4
Such an argument, however, only looks at the benefit side of the problem neglecting the
potential cost of choosing that alternative. Any other use of the surplus area will be an
opportunity foregone (opportunity cost) if more land is used for milk production. As
discussed, the strategic importance of land use entails that this alternative use of land, and its
effects on the environment, is taken into account in a LCA to be used for environmental
policy or strategic decision-making.

In a comparison between different agricultural production systems an additional issue of

strategic importance is the in teraction between agriculture and other parts of the society. One
example is energy supply, where agriculture is both a buyer of energy (input to the
production system) and a supplier of energy (output from the production system). In fact, the
need for and use of renewable energy sources is one essential motivation for some LCA
applications. This exchange of energy between agriculture and society is in itself such an
important issue that it motivates the need to illuminate the alternative use of land in LCA. It
is both possible and eligible that the alternative land use is production of energy crops. The
extraction of energy for example heating – the additional product and benefit in the
conventional system – will in turn diminish the dependence for fossil fuel. Using less fossil
fuel will in turn affect the emissions of carbon oxide and other green house gases in a positive
direction. A conventional system for milk production plus energy crop production may,
combined, lead to less emissions of carbon oxide and other green house gases compared to
organic system. The information on the effects of alternative use of land is therefore useful to
authorities since they, relatively quickly, can change the relation in economic value between
different cultivation options through, for example, taxes and subsidies (Ekvall 1999).

There are a number of other possible uses of redundant arable land, as with other limited fix
resources. As argued above these different options should be considered in LCA applications
to evaluate the full environmental effects of each system. Accordingly, the strategic
dimension of land use involves not only the choice between different agricultural production
systems but also relations and exchanges with other parts of the society. The use of and the
method of the LCA must be related to these different contexts. The meaning is: in an
operative perspective the environmental burdens such as emissions of carbon oxide (CO 2)
and other green house gases are based only on a comparison between the actual difference
between conventional and organic milk (i.e. a product level comparison), in a strategic
perspective the comparison should include the effect on carbon oxide and other green house
gases of different use of land (i.e. a system comparison), thus considering the full
implications of each strategy.

The different decision-making context and thus the different purposes with an LCA entail
different methodological design (Tillman 2000). If a LCA is supposed to give information
about the “best” environmental alternative given a combination of social and economic goals
a precondition is the equality of the benefits of the compared systems as well as the provision
of information about the environmental consequences of the options available (Fleischer and
Schmidt 1996). The strategic system level application thus must address a wider boundary
setting including an evaluation of different land use alternatives. The question of system
boundary choices and system expansion has been a subject of great interest in LCA research
(e.g. Ekvall et al 1992; Tillman 1994;). System expansion has, however, mostly been
discussed as an approach for avoiding allocation at multi-function processes or open-loop
recycling (Ekvall 1999), but such an expansion does not address the system level issue of
considering the environmental effects of different use of land. The product related system
boundaries of the classical LCA used by Cederberg and Mattsson (2000) for comparing a

5
conventional and an organic milk production system might be to narrow neglecting important
effects caused by the interaction between physical flows and economic mechanisms such as
allocation and substitution of resources. A classical product-LCA approach applied to
strategic decisions may in that case lead to environmental sub-optimal solutions.
Incorporating the well established economic concept of opportunity cost will give us the
opportunity to highlight the differences in result between an operative and a strategic LCA.
Furthermore, as this approach deals both with the resource perspective and the system view,
core issues of industrial ecology (Jelinsky et al 2001), it provides development opportunities
that changes the narrow product-LCA method into a concept in which man-made systems is
viewed not in isolation from its surrounding systems but in concert with them. As such it will
support the industrial design of products and processes and the implementation of sustainable
manufacturing strategies.

3 Method

3.1 Material and assumptions

The data in this article is based on a LCA comparison between conventional and organic milk
production conducted by Cederberg and Mattsson (2000). They collected data from two
relatively large dairy farms in the west of Sweden. Their analysis deals with all phases of the
life cycle of milk production, including production of materials, energy used and the
transportation. The time frame is the milk production during one year. Buildings and
machinery were excluded from the study due to the fact that the buildings had a similar
design on the farm studied and that there where lack of data regarding machinery used in crop
production. The figures presented below are accordingly calculated on the basis of the data
presented by Cederberg and Mattsson.

The alternative land use assumed in this article is energy crop (Salix) production. Energy
crop is chosen due to the fact that the interest in biomass production as an alternative in
future energy supply system is increasing (Hanegraf et al 1998).

Agricultural products can contribute significantly to green house gases (D J Gielen et al

1998). As a consequence, green house gas emissions deserve special attention in LCA of
these products, especially if the results are used for policy or strategic decisions. The impact
category chosen in this study is accordingly emissions of green house gases, i.e. carbon oxide
(CO2), methane (CH4) and nitrous oxide (N2O).

3.2 Methodology of life cycle analysis

The general outline on how to perform LCA is given in ISO 14040 (Anon 1997). More
technical requirements and recommendations for the various phases of an LCA are specified
in the draft standards ISO 14041 till ISO 14043. These ISO-standards are, however, generic
and do not address case or application specific issues. According to ISO, a full environmental
LCA includes 4 phases: Goal and scope definition, Inventory Analysis, Impact Assessment
and Interpretation. The focus hereafter will be on the functional unit and defining the system
boundaries sub-phases of the goal and scope phase.

6
Functional unit

One problem with comparative studies is the fact that only rarely products or systems have an
environmental profile, which is better on the whole line when compared to the profile of
another product or system. Furthermore the different environmental burdens, caused by
different production systems, can only be assessed if the system investigated delivers the
same benefits, i.e. system 1 delivers a product A 1 with quality and quantity equal to product
A2 delivered by system 2. If system 1 causes an additional benefit by an additional product B
and more environmental burdens an appropriate assessment of the environmental burdens
between the systems is not possible (Fleischer and Schmidt 1996). In these cases it must be
decided whether the higher environmental burdens of system 1 can be compensated by the
additional benefit of product B. The comparability has to be considered when formulating the
functional unit (FU). The FU constitutes of the service delivered by the product investigated.
This measure of performance then serves as the reference quantity i.e. the unit to which all
the ecological burdens are related.

Depending on the purpose of the LCA, different functional units can be chosen. In a review
de Boer (2003) concludes that most published LCAs comparisons between conventional and
organic milk production use a FU that consist of the mass of the product, e.g., kg or tonnes of
milk leaving the farm gate. Only a few LCAs refer the environmental impact to arable land
used for producing a certain amount of milk (e.g. Haas et al 2001). In this study we will
apply the latter approach as we consider land use to be vital for environmental policy and
strategic decision-making on all organisation levels. That is, we look at what 1 hectare can
produce and outputs from the system, i.e. emissions of green house gases, will accordingly be
related to 1 hectare. This approach changes the focus from the function of the investigated
systems to the function of a certain amount of land. This approach is chosen for two reasons.
For the first: if the LCA is to support a strategic decision in agriculture the comparability of
benefit and burdens between the systems is vital. Using a hectare as the FU makes the
systems more comparable in terms of benefits and burdens. Secondly, using 1 hectare, as FU
will highlight the relation between choice of technology, land used, and the opportunity cost.
We will still be able to apply all other elements of established LCA requirements.

System boundaries

LCA is mainly a system analysis of energy and material flows. The system is defined by
introducing system boundaries. The ultimate system boundary is between the economic
system and nature (Tillman et al 1994). If the LCA should support a strategic decision the
strategic importanc e of land use necessitates that the relationship between the environmental
aspects and the economic issues of land use are illustrated. Valuation of land is often deduced
from the value of what can be cultivated on the land in question.
It is therefore important, in strategic LCAs, to account for the alternative use of land and
consequently the benefits, both in environmental and in economic terms, of this use.

Furthermore, a strategic LCA should focus on the most essential effects of a production
system. It is the total environmental burden of a production system that should form the basis
for a decision. Using a classical product-LCA approach – where the life cycle of the product
is the starting point of the analysis – may lead to a focus more on details within that life cycle
than on important effects outside the life cycle (Ekvall 1999). Instead a strategic LCA should
focus on which system, on the whole, that is preferable in a wider environmental perspective.
Individual processes and activities within the system are of minor interest. Accordingly a

7
strategic LCA should account for the indirect burdens caused by the alternative use of land
area. To account for the indirect burdens caused by the alternative use of land area, the
system investigated should be expanded to include the alternative use (figure 1).

Production of fertilisers, diesel, pesticides

Cultivation of Cultivation of Production of diesel, fertilisers, pesticides,

Oil/starch Sugar beets seeds
Crops
Extraction Sugar industry
industry feed
Local production of
Feed Co-products grain and peas
industry from sugar
industry
Concentr. Feed The Diary Farm

Cultivation Arable Land

of Salix Manure

Harvest of Heifers Cows Silage, hay, pasture, grain, peas

Salix
Heifer Fodder
Transportati calves
on of Salix

Energy Milk Meat

Figure 1. Flow diagram for milk production and energy crop production. Only the conventional farm uses
fertilizers and pesticides in its crop production and co-products from the sugar industry ( italic). Peas are used as
fodder only on the organic farm (underlined). Only in the conventional system there is land available for energy
crop production. Based on Cederberg and Mattsson (2000)

For the purpose of including the alternative use of land the system boundaries has been
expanded, compared to a classical approach. The starting point of the analysis is the resource,
i.e. the amount of land that constitutes the base for the system. That is, the LCA-OC
presupposes from a land perspective the grey square in figure 1.

4 Results
4.1 Land use

In order to illustrate the difference between a classical product-LCA and a strategically

adjusted LCA an assumption is made that both systems should produce the same amount of
milk. The reference system is organic milk. This system is estimated to produce 2887 kg milk
per hectare arable land.

8
 1,0
0,15
0,444
Hectare
Land for other use
0,5 0,083 Land use for meat
0,85
Land use for milk
0,472

0,0
Conventional system Organic system
Production system

Figure 2 Land allotments in the conventional and the organic system when 2887 kg milk is produced

As the conventional system produces 5190 kg milk per hectare the amount of land necessary
for a production similar to the organic system is 0,56 hectare, figure 2. Earlier LCA studies of
milk are relating to filled parts of the land use pattern as of figure 2, where the actual figures
presented are based on Cederberg and Mattson (2000). Relating milk output to land involves
the intensity effects in the dairy and the plant production. This example illustrates a
significant land use effect. In figure 3 the conventional and energy crop production system is
introduced where the surplus land of the conventional system is used for an energy crop, in
this study Salix.

1,0
0,15
0,444
Hectare

Land for energy crop

0,5 0,083 Land use for meat
0,85
Land use for milk
0,472

0,0
Conventional system Organic system
plus energy crop
Production system

Figure 3 Land allotment in the conventional - energy crop system and the organic system when 2887 kg milk is
produced

As a higher intensity in production affects both milk and meat the amount of land for meat1
also decreases. Thus the milk produced, 2887 kg and meat is the same in both systems. It can
be argued that the feed intake in the conventional system is more concentrated on milk yield,
which in turn would alter the relationship between feed intake and the output of milk and
meat between the two systems. We have however chosen to assume that the relationship
between feed intake and the output of milk and meat is the same in both systems. In doing so
we follow earlier studies and our result can therefore easily be compared to studies with a
traditional life cycle approach.

1
The allocation is based on a casual relationship between feed intake and the output of milk and meat. Meat
production is assumed to use 15% of 1 hectare of crop production and the remaining 85% is allocated to milk
production.

9
4.2 Emissions

Conventional produced milk is estimated to release 178.125 kg CO2 /1000 kg milk using
0.1925 hectares. In our case where the starting point is 1 hectare similar to an organic
production of 2887 kg milk the emission figures for the conventional system is calculated to
be 437 kg CO2. Organic milk production is estimated to release 147,6 kg CO2 /1000 kg milk
using 0.3464 hectares. Total CO 2 -emissions for the compared systems is shown in figure 4.

1000

800
304
Kg CO2

600 Salix
77 77 64 Meat
400 Milk
200 437 437
362

0
Conv. and energy Conventional Organic system
crop system system
Production system

Figure 4 CO2-emissions for the compared systems

In the conventional – energy crop production system we have introduced the idea of using the
surplus land for Salix production. Using bio fuel e.g. as a source for heating is often regarded
as CO2 neutral i.e. the amount of carbon dioxide released correspond to the amount that is
necessary for the creation of new biomass. On the other hand a certain amount of energy is
needed in the production of Salix. This energy often has a fossil origin and will thus lead to
an increased amount of CO2 in the atmosphere. The energy input for cultivation, harvest and
transportation of Salix correspond to 4,3% per mega watt-hour delivered fuel (Magnusson
1993). The emission data for Salix presented in figure 4 is based on those assumptions.

4.3 Net CO2 calculations

The energy that can be derived out of Salix in the conventional and energy crop system is
assumed to replace fossil fuel as a heating source in central heating systems. Replacing fossil
with bio-fuel implies a reduction in carbon oxide emissions. Figure 5 shows the result of
these net calculations.

10
 Or
ga
nic
Co sys
nv tem
en
tio
na 426
Co l sy
nv ste
. an m
de
-cr 514
op
sys
.
-5988

-7000 -6000 -5000 -4000 -3000 -2000 -1000 0 1000

Net CO2 releases, kg/hectare

Figure 5 Net CO2-emissions for the compared system

The conventional plus energy crop system and the organic system uses 1 hectare while the
conventional system only uses 55,6 % of this area. In a comparison between the two systems
using a classical product-LCA approach the amount of CO 2 emissions would be 21 % or 88
kg higher in the conventional system. An LCA OC approach, i.e. the inclusion of Salix
cultivation in the conventional system, on the other hand exhibits another picture. This
approach implies that emissions of carbon oxide reduces with almost 6,0 tonnes per hectare
in the conventional system and in comparison to the organic system with almost 6,5
tonnes/hectare.

4.4 Global Warming

Agricultural production can contribute to global warming through CO2, CH4, and N2O
emissions. The main source of carbon oxide emissions is the use of fossil fuel. Methane
forms in connection with rumination and storage of manure. The rate of N2O-emissions is
dependent on the use of nitrogen fertilisers. Energy corps has a lower nitrogen demand than
food crops and a transaction from annual corn production to energy crop production reduces
the amount of N2O emissions with 0,3 kg/hectare and year (Börjesson 1999). In our
calculations we therefore assume that the transaction from food crops to Salix cultivation will
have negligible impact on N2O emissions. Both CH4 and N2O have high Global Warming
Potential (GWP) and in figure 6 a comparison is made between an organic system, a
conventional system, and a conventional plus energy crop system based on the systems
contribution to global warming.

11
 O
rg
an
ic
sy
ste
Co m
Co nv
nv . sy
.an ste
de m
-cr Totalt
op
.sy
s N2O
CH4
CO2

-10000 -5000 0 5000 10000

Global Warming Potential (Kg CO2-equivalences/hectare)

Figure 6 Contribution to global warming

An approach that includes the alternative use of land, i.e. the LCA OC where the
conventional plus energy crop system is introduced, will show a result where the total amount
of CO2-equivalences is reduced by nearly 1,8 tonnes/hectare.

5 Discusion and conclusion

Initially developed by engineers and natural scientists for assessing physical flows and
environmental effects of industrial products the LCA method has during the last decade used
for decision-making in natural-resource based industries. A general conception of
environmental and holistic appeal has made the LCA-method popular and from its product
related natural science based design and use, the application of the method has expanded to
include strategic, economic decisions and policy in agriculture. This use of LCA for wider
scope purposes is tested in this paper through a simple LCA case study comparing an organic
and a conventional milk production system. Now establishe d conventional LCA-method is
shown to have severe shortcomings for environmental economic decisions. It is shown to fail
and give wrong indications on several environmental impacts especially on green house
gases. Therefore, the LCA method needs to be developed beyond current narrow natural
science/technical feature to be used for economic, strategic decisions and policy.

The role and meaning of opportunity cost principles in LCA is best demonstrated in the
definition of the functional unit and the system boundaries. These actions are especially
important when alternative land use and opportunities forgone is to be regarded. In a LCA the
functional unit serves as the base and the starting point. It is a measure that in a clear and
relevant way should describe the service delivered by a product or a system. Furthermore, to
make fair judgements about the environmental performance between two agricultural
production system both system most be accounted for in the same functional unit. Thus, in a
classical produc t-LCA the starting point of the analysis is the product itself and in a
comparison of conventional and organic milk the functional unit is expressed as a certain
amount of milk produced. However we believe that such an approach does not sort out the
short-run and long run issues involved. An incorporation of environmental effects, as done in
the classical LCA method, seems, falsely to make those applying the approach and those
using the results believe that the cradle to grave approach together with measur ing the
environmental effects are enough for making strategic interpretations of the results. But,
applying FU of the classical LCA method does not make the system equal when land is a

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significant input as in primary agriculture and forestry. All benefits and burdens are not
accounted for due to the fact that there can be important effects not accounted for in a strict
product delimitation of the FU.

Since the functional unit serves as the base and starting point of the analysis the definition of
the functional unit also will determine the scope of the study. The difference between the two
system caused by technology development will therefore not be reflected in the technological
system if the FU is based on milk output solely. Classical LCA is dependent on situations
where the system boundaries between the technological system and nature can be clear-cut.
However in agriculture a clear separation between those two systems cannot be made. Since
production itself not only takes place in nature but uses natural resources as inputs we need
some developments of the LCA method. Traditionally and according to the classical product-
LCA approach land is seen as part of the technological system. The most important argument
for this is that effects on land of agriculture should be taken into account. Land is seen as an
input, among other resources, and will be accounted for in the impact category resource use.
This procedure will however lead to that only the amount used and the quality effects on this
amount are accounted for. As a consequence this approach will lead to the exclusion of the
alternative use of land (and its effects on the environment) that may be redundant as an effect
of technique used.
As well established, primary agriculture is full of example of land-saving inputs applied. The
land use effects are very evident in a choice between a conventional versus an organic
production system. In this case the classical way of handling land input is shown in this study
to be obscure.

However, at the same time as a conventional system reduces land use and releases land for
alternative use, which can have important effects on the environment, we are well aware of
suggestions that the quality and sustainability of the soil may demote quicker in the
conventional system than in an organic system. This aspect together with other positive
environmental and cultural values connected to organic production has not been handled in
this paper. It is vital to point out that these delimitations have an important role in a LCA of
conventional and organic production. Aspects such as biodiversity, landscape image, impacts
on human health and animal welfare most also be incorporated into the assessment to get a
more complete picture. As Haas et al (2000) points out these aspects can be accounted for if
they are represented by individual impact categories. The way to define the functional unit
presented in this study is appropriate for all these categories besides biodiversity and
landscape image where the whole farm or regional areas might be more meaningful units. In
this way both qualitative and quantitative aspect of land use can be accounted for. However,
the objective with this study was not to determine the best alternative between conventional
and organic production, rather to point out the meaning and role of opportunity cost
principals and with that contribute to the development of LCA for strategic decisions. Our
results should therefore not be seen as complete answers to which system that is preferable in
a sustainability perspective. By introducing opportunity cost principles in strategic LCAs we
argue that the comparability between different systems increases and that risk for sub-optimal
decisions will be reduced. Including alternative land use in the assessment demonstrates that
there can be important effects outside the production chain.

In our case study we have illuminated quantities that will not be accounted for in a classical
product-LCA approach and if these quantities are excluded the result of the LCA may be
misleading. The functional unit and the system boundaries should reflect differences in
production methods and land use. Less land used due to the use of different techniques and

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methods give rise to alternative land use while these alternatives will be opportunities
foregone if more land is used.

When used, as a base for strategic decision land use in LCA should not be seen as an input
that can be replaced or changed instead it should be the starting point of the analysis and
consequently be regarded as a production process in the chain. In doing so the comparability
between the two systems will increase and the LCA will give more realistic long-term
outcomes.

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