Carbon footprint refers to the amount of greenhouse gas emissions from an individual or an organization. Depending on where one lives, it is possible to unconsciously lower or increase the amount of GHG emissions (Carbon Footprint Factsheet | Center for Sustainable Systems, 2021). An analysis shows that there is a huge difference between GHG emissions by persons living in an apartment, a conventional house, a tiny house and in a dormitory. This is because of the different lifestyle behaviors one tends to adopt for living in such places. A comparison between GHG emissions between the four places shows that annually, the average GHG emissions from a tiny house amounts to 9422lbs. This is 5578lbs lower than the emissions from a conventional or apartment house which amounts to 15000lbs annually (Goldstein, Gounaridis, and Newell, 2020; Footprint, 2021). The lowest emissions are from the dorm at 6678lbs annually (Are There Ways to Offset My Dorm? | Offset Carbon Footprint, 2021). These are statistics based on the information provided by the US department of energy.
Cost Benefit Analysis of Tiny House
As the name suggests, tiny houses are smaller dwelling places with lesser resources for entertainment. The structure of these dwellings are geared towards making the dwellers limit wastage and utilize every resource around. To avoid much wastage through excessive emissions, tiny house dwellers tend to consume less so that they will generate less refuse. They also tend to use lesser energy than people living in mansions and bigger places. Some of the areas where tiny house dwellers save money is on energy. Instead of using gas, oil or electricity, most of them use their compost to generate heat. This also benefits the environment by reducing the amount of landfills expected. Additionally, the construction of composts is quite simple and can be done by the owner, with the help of his friends, therefore, reducing contractor fees to zero. We therefore analyze the tiny house by comparing the costs and benefits involved in either constructing a compost for energy or using electric and gas energy year over year. A compost has a life span of at least 30years once constructed. Additionally, the compost adds value to the farm, thus increasing the farm value overtime. We however assume a 10 years operation period for the sake of this calculations.
Identifying and quantifying costs and benefits
The total benefits to the tiny house dwellers are equivalent to the avoided costs that would have resulted from the annual use of electricity and gas (levelized cost of energy-LCOE) rather than using compost energy. The relevant costs here are the costs of constructing a fully functional compost. Building an LCOE would cost $1.5 million, with annual operating and maintenance costs at $100,000 per year. The LCOE is expected to be observed for the next 10 years.
For cost analysis purposes, the compost to be constructed is an “on-grade 3-bay system; constructed out of concrete retaining and divider walls and steel; designed to be architecturally consistent with the other buildings on the farm; 6 months of storage plus a considerable amount of concrete for aprons and driveways; and built by a contractor. The total initial costs is assumed to be $50,000, with annual improvement costs of $10,000 (The Economics of Composting, 2021). In the United States, such good initiatives always attracts grants from government. We therefore assume that the construction will attract a grant of 87% of construction costs, which is the maximum. However, due to the tedious procedures and the long waiting involved, the owner would construct without filing for a grant.
Determining the discount rate
For purposes of this assignment, we use a discount rate of 3.5% for both projects (Environmental Discount Rate Review, 2021).
Summary of the Analysis
From the analysis, tiny house dwellers save more than $2 million by choosing to construct a compost rather than build an LCOE. The actual savings would be $2,101,876.12. This is a huge positive figure, making the construction of a compost highly desirable. This is considered the NPV of the compost construction project. The B/C ratio is hereby determined by dividing the NPB of building LCOE to the NPV of compost construction. Therefore;
B/C ratio = 2235042.17/133166
The compost project also has less risks since most of the compost material are generated from wastes and are readily available, as opposed to the LCOE project.
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