Allocation

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What is allocation?

Allocation refers to the process of dividing the inputs and emissions from a manufacturing process among its multiple outputs. This is particularly important when a process produces several co-products that can be sold. Allocation establishes rules to assign emissions from the overall process to each co-product in a fair and methodical way. If a process produces both co-products and waste, allocation rules also ensure emissions are only assigned to the co-products and not the waste.

While it’s often possible to avoid allocation by breaking the process into smaller subprocesses, in many cases, allocation is unavoidable. The specific rules to follow depend on the methodological standard used to compile the Product Carbon Footprint (PCF).

By default, if you are building a PCF using M2030’s PCF builder, then the methodology you are following is the PACT Methodology.

What are the rules for allocation in the PACT Methodology?

The PACT Methodology provides a simple decision tree which can be used to determine what is the correct approach.

pact_allocation_decision tree.png

To correctly follow the approach you should:

  1. Avoid allocating where possible: If you can subdivide a manufacturing process into smaller subprocesses, allocate inputs and emissions to these subprocesses directly. For example, if a factory has two distinct production lines for separate products, input data can be assigned to each production line without further allocation.
  2. Apply system expansion rules: Use this method only if you have direct knowledge of the co-product’s function and eventual use. This requires identifying a dominant displaced product and production path, which can be challenging. (Note: The M2030 PCF builder currently does not support system expansion)

  3. Determine the economic ratio of co-products: The next step is to understand the economic value of the co-products that get created from a process. This helps determine what sort of allocation rules we should follow. The steps are:

    • Calculate the ratio of the most valuable co-product to the least valuable co-product.
    • If the ratio exceeds 5:1 then use economic allocation
    • If the ratio is less than or equal to 5:1 then use a physical basis for allocation (in most cases, mass)

  • Let’s illustrate how allocation works with a hypothetical process that produces four outputs:

    • Co-product A: 10kg produced – worth $100
    • Co-product B: 6kg produced – worth $35
    • Co-product C: 3kg produced – not sold (economically worthless)
    • Co-product D: 4kg produced – worth $25

    The first step is to remove from consideration any ‘waste’ products that have no economic value. In this case, we remove co-product C from consideration.

    The next step is to apply the allocation rules. First, we determine the ratio of the most valuable to the least valuable co-products:

    Since this ratio is less than 5:1, we apply a physical allocation basis, such as mass.

    This means that we should scale our input data on the basis of the physical ratios of the produced outputs. Let’s say we want to compile a PCF for co-product A alone then we would need to scale all our inputs by:



    So, all our inputs relevant to this product should be multiplied by 0.5.

What does this mean for the data I enter into M2030?

Currently, M2030’s PCF builder does not support allocation within the platform. To ensure accurate PCFs, you will need to calculate allocations manually before entering data.

Here's how to proceed:

  1. Follow the decision tree: Use the steps above to determine the correct allocation method for your process.

  2. Pre-allocate input data: Use simple calculations like in the example above or consider advanced modeling for more complex scenarios.

  3. Enter data into M2030: Input the allocated data directly into the PCF builder. Allocation cannot be adjusted after a PCF is calculated.

M2030 is developing an Excel-based tool to help with these calculations, making it easier to allocate inputs for co-products in future updates.

FAQs

  • When you have data for your total facility and have no other information available to be able to estimate the relative inputs per product, then you can apply these allocation rules to the total facility data.

    For example, if you’re facility makes 1,000 tonnes of product in a given time period, and 10% of this is for product A (i.e., 100 tonnes), then the energy you consume to make your product can be approximated to be 10% of the total energy consumed across your facility. Make sure you use the correct allocation approach (physical or economic) based on the standard you are following!

    You can then either:

    • Input data that is 10% of your total facility data, making sure to change the declared unit to be the total production (in Product A’s case, this would be 100t).
    • If you want to do a PCF for an individual product, then you would need to follow the following logic:
      • Let’s assume 1 unit of product A weighs 1t
      • Then in all, we have sold 100 units of product A in our time period (100t / 1t)
      • Divide all our inputs by 100 to get the inputs per unit of product

    Either approach would enable you to estimate a product carbon footprint for this product. You might have to do this several times if you have lots of products to estimate PCFs for. Remember, it is always best to try and avoid allocating in this way if you have better data available. Always make sure to refer to the standards you are following to make sure you are making the right method choice.

 

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