Valuing GHG emissions and uncertainty in transport cost benefit analysis

David Meunier () and Emile Quinet
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David Meunier: LVMT - Laboratoire Ville, Mobilité, Transport - IFSTTAR - Institut Français des Sciences et Technologies des Transports, de l'Aménagement et des Réseaux - UPEM - Université Paris-Est Marne-la-Vallée - ENPC - École nationale des ponts et chaussées
Emile Quinet: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: The transport sector has an important and increasing role in greenhouse gases (GHG) emissions. Global climate change is a growing issue in the public debate, and cost benefit analysis (CBA) of transport projects should give in this regard accurate and objective information. Indeed, many countries have included this concern in their CBA guidelines. But it usually consists simply in adopting an official value per ton of carbon emitted. Does this mean that the issue is correctly treated by CBA? Since "the devil is in the details" this paper reviews key items influencing the quality of CO2 emission valuation, estimating the order of magnitude of their effects and taking into account the nature and degree of imprecision and uncertainty associated with them. In CBA, valuation of CO2 effects is represented by the product of a unit value and a physical quantity. Without dwelling much on the issue of fixing a unit value for CO2 emissions, which is supposed to capture also the uncertainties associated with a marginal ton of CO2 emitted, we focus on the quality of estimation of the variations in physical CO2 quantities emitted due to a given transport project. Using feedback from ex-post studies together with recent developments in applied methods for risk valuation, we discuss methods for correcting common biases and for taking into account systemic risk, i.e. the risk associated with the links between the benefits of an investment and economic growth. These methods are illustrated for several types of emission reduction projects, giving indications on how their respective risk premiums due to quantity uncertainties could translate into adjusted discount rates.

Keywords: Cost-benefit analysis; transport; climate change; carbon price; uncertainty; CO2 emissions (search for similar items in EconPapers)
Date: 2014
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Published in European Transport Conference 2014, 2014, Francfort, Germany. 14 p

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01107877

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