Carbon Emission Values in Cost Benefit Analyses
AbstractNew infrastructure projects may affect CO2 emissions and, thus, cost benefit analyses for these projects require a value to apply for CO2. The value may be based on the marginal social cost associated with emissions or on the shadow price resulting from present and future policies geared towards CO2 emissions. In the present paper it is argued that the social cost approach should be seen as preceding the shadow price approach. Both are thus necessary, but for cost benefit analysis of infrastructure projects we argue for the shadow price approach as the primary tool. There is a series of complications involved when applying this principle in practice. Several of these are discussed in the paper, including non-marginal projects that affect permit prices, non-transparent permit markets, different instruments capturing different aspects of a CO2-value, multiple policies present simultaneously etc.
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Bibliographic InfoPaper provided by Swedish National Road & Transport Research Institute (VTI) in its series Working Papers with number 2010:4.
Length: 20 pages
Date of creation: 20 Jan 2010
Date of revision:
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Climate change; policy; cost-benefit analysis; carbon value;
Other versions of this item:
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
- R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-30 (All new papers)
- NEP-ENE-2010-01-30 (Energy Economics)
- NEP-ENV-2010-01-30 (Environmental Economics)
- NEP-PPM-2010-01-30 (Project, Program & Portfolio Management)
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