Economic Analysis of Projects in a Greenhouse World

Hamilton, Kirk ; Stover, Jana

World Bank, Washington, DC

关键词: AIR;    AIR POLLUTANTS;    AIR POLLUTION;    ATMOSPHERIC CONCENTRATIONS;    AUCTION;   

DOI  :  10.1596/1813-9450-6117
RP-ID  :  WPS6117

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Recent carbon market prices aresubstantially lower than mean or median estimates of thesocial cost of carbon in the literature. Intuition wouldtherefore suggest that 'investment errors' arebeing made, in the sense that markets favor highercarbon-emitting projects, while global welfare would belarger with lower carbon-emitting projects. This intuitionis correct in specific circumstances, but not others. Forany comparison of two alternative projects, there is acarbon switching price that equalizes their net socialbenefits. From the perspective of maximizing global welfare,investment errors only occur when this switching price liesbetween the carbon market price and the social cost ofcarbon. Data on the costs of high-carbon and low-carbonelectric generation projects suggest that there is nofinancing gap using mean or median published figures, butfor precautionary (95th percentile) choices of the socialcost of carbon, there is a financing gap between carbonmarket prices and the switching price that would triggerinvestment in the global welfare-maximizing low-carbonproject. A global carbon fund to finance this gap could beconceived, but stricter emission caps and reforms of carbonmarkets are likely to be a more efficient solution to the problem.