Working Papers, Swedish National Road & Transport Research Institute (VTI)
Carbon Emission Values in Cost Benefit Analyses
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; (follow links to similar papers)
JEL-Codes: H54; Q51; R42; (follow links to similar papers)
20 pages, January 20, 2010
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