Conceptual framework for the evaluation of cost-effectiveness of projects to reduce GHG emissions and sequester carbon.. LBL.
This paper proposes a conceptual framework for evaluating the costs of projects to reduce greenhouse gases (GHGs). The evaluation of cost-effectiveness should account for both the timing of carbon emisions and the damage caused by the atmospheric stock of carbon. We develop a conceptual basis to estimate the cost-effectiveness of projects in terms of the cost reducing atmospheric carbon (CRAC) and other GHGs. CRAC accounts for the economic discount rate, alternative functional forms of the shadow price, the residence period of carbin in the atmosphere, and the multiple monetary benefits of projects. The last item is of particular importance to the developing coutries. The paper comments on the appropriate discount rates which should be used for evaluation of a project's carbon flows. We suggest that this rate be different and lower than that used to evaluate monetary costs and benefits. The CRAC indicator may be used to rank projects to reduce atmospheric carbon. Projects with increasing CRAC may be pursued until a limit is reached. This limit may be defined by emissions stabilization goals or by the availability of funds for carbon reduction. The CRAC indicator is sensitive to the future shadow price of carbon. The future shadow price should be determined prior to the ranking of projects for implementation..
Ministerio de Ambiente y Energía. Secretaría de Planificación del Sub-Sector Energía - Centro de Información de Energía y Ambiente, CIENA
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