Industrial ecology in policy making: What is achievable and what is not?

A diverse set of tools has been developed in Industrial Ecology to tackle the problems caused by human economic activity. These instruments include Life Cycle Assessment (LCA) and Material Flow Analysis (MFA). Especially LCA is now increasingly used in policy making. Design and Evaluation of policy measures necessitates careful weighing of costs and benefits. One has to consider the complex economic effects imposed by regulation, like costs for the industries affected by regulation, indirect effects on other industries and ecologically important rebound effects. This article discusses to what extent this evaluation is possible within LCA and MFA models. It is found that these models do not sufficiently incorporate the overall consequences of regulation and hence are not very suitable to measure the advantages or disadvantages of regulations. Therefore, adding economic aspects to Industrial Ecology models seems promising. In policy making, the effects imposed on the whole economy have to be captured, which calls for a general equilibrium framework. A Life Cycle based Computable General Equilibrium Model is proposed as a tool to assess the economic effects of regulation while remaining in life cycle thinking.