Institute of the Environment and Sustainability

Lifecycle Analysis (LCA) has become an important tool for guiding regional or national policy actions to address global environmental problems such as climate change. LCA-based indicators of greenhouse gas (GHG) intensity of di�erent fuels are being used to design long-term policies supporting renewable and alternative energy technologies. However, some of these technologies risk proving counter-productive to policy goals. An example is the debate about the environmental bene�ts of biofuels. Using biofuels as an illustrative example, we identify the structural reasons for the di�erences between two strands of literature on environmental bene�ts of alternative energy, namely, lifecycle analysis and economic market-equilibrium analysis. We explain why a policy planner cannot assume the potential environmental gains as revealed by a comparison between two LCAs as given while selecting policies to capture those gains. In other words lifecycle indicators are endogenous variables in the policy-selection problem. A capacity to compute lifecycle indicators as a function of economic variables and policy parameters can help policy planners better compare the implications of di�erent policy actions.