The by-product technology model is a term used in input-output economics that refers to the same methodological approach known in Life Cycle Assessment as System expansion. This model represents a procedure for avoiding co-product allocation when dealing with activities that produce multiple product outputs.
In the by-product technology model, by-products are eliminated as activity outputs through a mathematical transformation. Rather than appearing as positive outputs that require allocation of environmental burdens, by-products are instead included as negative inputs to the system. This transformation effectively expands the system boundary to include the additional functions provided by the by-products, whilst simultaneously accounting for the substitutions that occur in the broader product system when these by-products displace other products in the market.
The terminology difference reflects the disciplinary origins of the concept. Input-output economics, which deals with economy-wide material and monetary flows organised in matrices, uses the term "by-product technology model" to describe this mathematical treatment of multi-output activities. Life Cycle Assessment adopted the same fundamental approach but typically refers to it as system expansion or by-product elimination by substitution. Despite the different names, all three terms describe the identical methodological procedure for handling co-product situations without resorting to partitioning.
This approach is particularly relevant in consequential Life Cycle Assessment, where the focus is on modelling the changes in production systems that result from changes in demand. The by-product technology model allows analysts to trace how by-products influence other activities in the economic system through displacement and substitution effects.
