Resource constraints for suppliers
Usually, constraints are less likely to have a long-term impact compared to the short term. Since Life Cycle Assessment (LCA) commonly relies on a long-term perspective, the complete supply elasticity is generally assumed, even regarding the sourcing of raw materials. However, even in a long-term perspective, specific raw materials or technologies may be subject to restrictions.
If the necessary factors of production, especially raw materials, are limited to local availability or already fully utilized, this becomes a constraint to consider in the analysis. For instance, the limited availability of fresh water in regions with low precipitation represents a constraint on resources. In a growing market for a specific material, the availability of recycled material may constrain the recycling industry. For products that are difficult to store and for semi-finished materials with a low price-to-weight ratio, such as biomass for energy and paper pulp, distances and transport infrastructures may impose constraints on products and materials not produced locally. Waste treatment capacity can pose a constraint on processes generating specific hazardous waste.
Political constraints
Quotas, taxes, or subsidies may limit the flexibility of suppliers or specific technologies in adapting their capacity in response to demand fluctuations.
The forced elimination of polluting technologies could make them unsuitable for responding to demand changes. Regulatory constraints usually manifest through minimum or maximum quotas on the process or any of its components. An example of a globally constrained activity is wild fishing, reflecting the scarcity of fundamental resources. Product quotas are commonly present in the EU agricultural policy, where, for example, milk and sugar are regulated through quota systems, acting as indirect subsidies to farmers' income. Taxes and subsidies can also pose limitations for specific producers. An example is the low importation of cereals in the EU, due to high import taxes. Similarly, farmers' crop selection is closely linked to the subsidy levels granted for different crops, effectively imposing restrictions on less subsidized crops.
Quotas, taxes, or subsidies derived solely from political motivations and not reflecting a limitation of fundamental resources are often temporary and, in some circumstances, can be influenced by demand changes. Therefore, it is advisable to conduct a sensitivity analysis to assess constraints based on such political regulations.
Constrained markets
A constrained market is a market where no supplier is able to adjust their capacity in response to a demand change or where the suppliers' response does not match the demand change. In such a situation, the (remaining) demand variation will be met by a variation in consumption by marginal consumers of the product. Constrained markets can be found when the only supply to the market comes from by-products (constrained by the demand of the products that determine them) or from suppliers constrained by the availability of resources or by political regulations.
Marginal consumers are those who enter and exit the market as prices rise and fall, generally consumers with the lowest alternative costs resulting from not using the product in question, and who are therefore the most sensitive to price variations.
The nature and extent of changes in consumption can sometimes be supported by the availability of empirical data in the form of demand elasticity (the relative demand variation in response to a price change) or cross-elasticity (the demand variation of other products in response to a price change of the analyzed product). The consequences of identified demand changes should then be followed downstream in the lifecycle.
Treatment markets, i.e., market activities operating on the treatment or disposal services of their determining products, can also be constrained when all treatment options are constrained. This can lead to the need to reduce waste treatment consumption, which typically can only be achieved by reducing the production volume of one or more activities that generate the material to be treated. This would typically be the activity with the least valuable production per unit of material to be treated.
Next lesson - "By-products, recycling, and waste"
