Net (economic) output is synonymous with Value added, representing a fundamental economic measure in Life Cycle Assessment and economic analysis.
Value added is defined as the value of the product output of an activity or group of activities (including subsidies) minus the costs of intermediate product inputs for the same activity or group of activities, related to a specified time period or reference product. This measure captures the economic value that an activity contributes through its transformation process, excluding the value that was already embedded in the materials and services it consumed as inputs.
In the context of Life Cycle Assessment, net (economic) output plays a crucial role in understanding the economic dimension of product systems. When value added is summed across all unit processes within a product system, it equals the life cycle costs of that product. This relationship makes net (economic) output essential for Environmental Life Cycle Costing analyses, where understanding the full economic value chain is necessary for comprehensive sustainability assessment.
The composition of value added typically includes several components: labour costs (wages and salaries paid to workers), net taxes (taxes paid minus subsidies received), net operating surplus (profits and returns to capital), and rent (payments for the use of land or other fixed assets). This breakdown helps analysts understand how economic value is distributed amongst different stakeholders and production factors throughout a product's life cycle.
The distinction between gross output and net (economic) output is important in LCA. Whilst gross output represents the total value of all product outputs including subsidies, net (economic) output accounts only for the value truly added by the activity itself, making it a more meaningful measure of economic contribution and efficiency in product system analysis.
