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Carbon Emission Values in Cost Benefit Analyses

  • Mandell, Svante

    ()

    (vti – Swedish National Road and Transport Research Institute)

New 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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File URL: http://www.transportportal.se/SWoPEc/Carbon%20emission%20values%20in%20CBA%20WP.pdf
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Paper provided by Swedish National Road & Transport Research Institute (VTI) in its series Working Papers with number 2010:4.

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Length: 20 pages
Date of creation: 20 Jan 2010
Date of revision:
Handle: RePEc:hhs:vtiwps:2010_004
Contact details of provider: Postal: VTI, Transport Economics, P.O. Box 6056, SE-171 06 Solna, Sweden
Phone: +46-13-20 40 00
Fax: +46-13-14 14 36
Web page: http://www.vti.se/tek
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  1. Mandell, Svante, 2008. "Optimal mix of emissions taxes and cap-and-trade," Journal of Environmental Economics and Management, Elsevier, vol. 56(2), pages 131-140, September.
  2. Mandell, Svante, 2008. "Steering the European transport greenhouse gas emissions under uncertainty," Working Papers 2008:4, Swedish National Road & Transport Research Institute (VTI).
  3. David Pearce, 2003. "The Social Cost of Carbon and its Policy Implications," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 362-384.
  4. Tol, Richard S. J., 2007. "The Social Cost of Carbon: Trends, Outliers and Catastrophes," Economics Discussion Papers 2007-44, Kiel Institute for the World Economy.
  5. Lori Bennear & Robert Stavins, 2007. "Second-best theory and the use of multiple policy instruments," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(1), pages 111-129, May.
  6. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-48, July.
  7. Pizer, William A., 2002. "Combining price and quantity controls to mitigate global climate change," Journal of Public Economics, Elsevier, vol. 85(3), pages 409-434, September.
  8. Tol, Richard S. J., 2005. "The marginal damage costs of carbon dioxide emissions: an assessment of the uncertainties," Energy Policy, Elsevier, vol. 33(16), pages 2064-2074, November.
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