Carbon Emission Values in Cost Benefit Analyses

Svante Mandell

No 2010:4, Working Papers from Swedish National Road & Transport Research Institute (VTI)

Abstract: 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.

Keywords: Climate change; policy; cost-benefit analysis; carbon value (search for similar items in EconPapers)
JEL-codes: H54 Q51 R42 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2010-01-20
New Economics Papers: this item is included in nep-ene, nep-env and nep-ppm
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Related works:
Journal Article: Carbon emission values in cost benefit analyses (2011)
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