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Climate Change Emission Valuation for …

Phone & Fax: 250-360-1560 Todd Litman 2009-2012 You are welcome and encouraged to copy, distribute, share and excerpt this document and its ideas, provided the author is given attribution. Please send your corrections, comments and suggestions for improvement. Climate Change Emission Valuation for Transportation Economic Analysis 22 February 2012 Todd Litman Victoria Transport Policy Institute Research assistance by Eric Doherty Climate Change threatens to reduce opportunities for snow play, as well as ecological stability, species survival, and human security. Abstract This paper describes Climate Change impacts and costs, presents methods for quantifying and monetizing (measuring in monetary units) these impacts, summarizes published unit cost estimates, and explains the values used in the report, Transportation Cost and Benefit Analysis.

Climate Change Emission Valuation for Transportation Economic Analysis Victoria Transport Policy Institute 2 Introduction Climate change (also called global warming and the greenhouse effect) refers to Earth

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1 Phone & Fax: 250-360-1560 Todd Litman 2009-2012 You are welcome and encouraged to copy, distribute, share and excerpt this document and its ideas, provided the author is given attribution. Please send your corrections, comments and suggestions for improvement. Climate Change Emission Valuation for Transportation Economic Analysis 22 February 2012 Todd Litman Victoria Transport Policy Institute Research assistance by Eric Doherty Climate Change threatens to reduce opportunities for snow play, as well as ecological stability, species survival, and human security. Abstract This paper describes Climate Change impacts and costs, presents methods for quantifying and monetizing (measuring in monetary units) these impacts, summarizes published unit cost estimates, and explains the values used in the report, Transportation Cost and Benefit Analysis.

2 Climate Change Emission Valuation depends on many factors including the range of impacts considered, the methods used to quantify impacts, and Emission reduction targets. Recent studies predict that damage costs are potentially very high if atmospheric greenhouse gas levels exceed critical thresholds, while Emission control costs are $20-50 per tonne of carbon dioxide equivalent (CO2e). Some transportation Emission reduction strategies have relatively low costs when co-benefits such as consumer savings, congestion reductions and safety are considered. Climate Change Emission Valuation for Transportation Economic Analysis Victoria Transport Policy Institute 1 Contents Introduction .. 2 Climate Change Science .. 3 Measuring Climate Change Emissions .. 4 Quantifying and Monetizing Climate Change Emission Costs.

3 6 Monetization Techniques .. 7 Damage Cost Estimates .. 9 a) Discounting Long-term Impacts .. 10 b) Global Factors .. 12 Value of life .. 12 Value of a dollar .. 12 c) Uncertainty .. 12 d) Non-Marginal, Non-Reversible Effects .. 12 The Future of GHG Damage Cost Estimates .. 12 Published Damage Costs Estimates .. 13 Control Costs .. 14 Emission Reduction Targets .. 16 Emissions Trading .. 17 Global Units Stern s Damage to Mitigation Ratio .. 17 Summary of Valuation Estimates .. 19 Emission Cost Summary .. 23 Transportation Emissions .. 24 Incorporating Emissions Costs in Economic Analysis .. 27 VTPI Climate Change Cost Values .. 28 Conclusions .. 29 References and Information Resources .. 30 Climate Change Emission Valuation for Transportation Economic Analysis Victoria Transport Policy Institute 2 Introduction Climate Change (also called global warming and the greenhouse effect) refers to Earth Climate changes caused by Emission of gases (called greenhouse gases or GHGs) that increase atmospheric solar heat gain.

4 Climate Change gasses such as carbon dioxide (CO2) are like salt in a soup: a certain amount is desirable but too much is unpleasant and harmful. Many experts believe that anthropogenic (human caused) increases in atmospheric greenhouse gasses pose significant costs (damages) and risks (possible future damages). In response, many jurisdictions, industries and consumers are committed to reducing their emissions. These often involve economic trade-offs, such as higher prices for more efficient equipment, or reduced consumption of energy-intensive goods such as air travel. To optimize such decisions it is useful to establish monetized (measured in monetary units) Climate Change emissions, assigning cost values such as cents-per-gram or dollars-per-tonne.

5 These are useful for decisions such as evaluating specific strategies, determining optimal Emission reduction policies, and for setting appropriate Emission prices and taxes (Litman 2008). This is important for transportation economics because transport activities are a major and growing source of Climate Change emissions, and transport system changes can involve various costs and benefits, as described in Transportation Cost and Benefit Transportation professionals often classify difficult-to-quantify impacts as intangibles (impacts that cannot be perceived by the senses) and exclud them from quantitative analysis. As a result, easy-to-measure impacts (such as project costs, vehicle operating expenses, and travel time savings) often receive more consideration than relatively difficult-to-measure social and environmental impacts, and concentrated, short-term impacts receive more consideration than dispersed, long-term impacts.

6 This biases decision-making in various ways. For example, it tends to favor economic objectives (because they involve market resources) over social and environmental objectives; industries (which have more financial transactions) over communities (which involve more non-market transactions); wealthier people (because they purchase more market goods) over poorer people; and the current generation over future generations. This paper provides an overview of these issues and describes the Climate Change Emission values used in the 2009 update of Transportation Cost and Benefit Analysis (Litman 2009). It summarizes information on Climate Change costs and risks, discusses methodologies for quantifying and monetizing these impacts, and reviews current Climate Change Emission unit cost values.

7 1 Todd Litman (2009), Transportation Cost and Benefit Analysis: Techniques, Estimates and Implications, Victoria Transport Policy Institute ( ). Climate Change Emission Valuation for Transportation Economic Analysis Victoria Transport Policy Institute 3 Climate Change Science Atmospheric concentrations of Climate Change gasses such as carbon dioxide (CO2) are increasing rapidly. Prior to the industrial revolution, CO2 levels were 260 280 parts per million by volume (ppmv). During the last century they have increased to about 36% to 380 ppmv and are projected to continue rising due to human activity, particularly fossil fuel consumption. A growing body of scientific evidence has indicated that Climate Change imposes significant costs and risks.

8 Although scientists tend to be cautious, among related disciplines (climatology, geology, ecology, etc.) there is virtual consensus that anthropogenic Climate Change is occurring and imposes significant environmental, social and economic costs and risks (Pew Center on Global Climate Change 2006). For example, the Intergovernmental Panel on Climate Change (IPCC 2007a), which consists of hundreds of scientists, concluded, Warming of the Climate system is unequivocal, as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice and rising global average sea level. The United Nations Environmental Program s 2007 Global Environment Outlook emphasizes the need for action to reduce these risks (UNEP 2007).

9 Although some organizations argue the evidence is inconclusive or that Climate Change provides as many benefits as costs ( Center for the Study of Carbon Dioxide and Global Change ), such groups generally have little climatic or ecological expertise, and often represent industries that benefit from continued Climate Change emissions (Sourcewatch 2008). As experts gain more understanding of Climate Change impacts they have become more concerned about its costs and risks, including possible catastrophic damages due to thresholds and positive feedback loops. For example, a detailed study lead by respected economist Sir Nicholas Stern called attention to the threat of permanent disruption to economic and social activity, later in this century and in the next, on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century (Stern et al.)

10 2006). In 2008 Stern stated that his earlier evaluation, mainly based on the IPCC s 2001 report, underestimated potential damages: "Emissions are growing much faster than we'd thought, the absorptive capacity of the planet is less than we'd thought, the risks of greenhouse gases are potentially bigger than more cautious estimates and the speed of Climate Change seems to be faster." (Adam 2008) The Australian Government s Garnault Climate Change Review, released in late 2008, provides an updated review of Climate science and economics. It indicates that current Emission trends have almost 50% chance of increasing global temperatures 6 degrees Centigrade by 2100, much higher than the 3% risk estimate made in 2007 (Garnault et al. 2008). A 2008 study by some of the world s leading Climate scientists argues that deep and rapid Emission reductions are needed to avoid catastrophic damage: "If humanity wishes to preserve a planet similar to that on which civilization developed and to which life on Earth is adapted, paleoclimate evidence and ongoing Climate Change suggest that CO2 will need to be reduced from its current 385 ppm to at most 350 ppm.


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