Adapting Transport Policy to Climate Change

Adapting Transport Policy to Climate Change

Carbon Valuation, Risk and Uncertainty You do not have access to this content

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24 Nov 2015
9789282107928 (PDF) ;9789282107911(print)

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Transport accounts for nearly a quarter of carbon dioxide emissions from fuel combustion. The price attached to these emissions is critical to climate policies and emissions mitigation efforts in the sector. As the impact of emissions on climate does not depend on where CO2 is released, the price of carbon should be uniform. In reality, however, it varies immensely, reflecting the complexity of assessing climate impacts.
This report reviews the three key challenges in considering the effects of carbon dioxide emissions in economic appraisal: the valuation of carbon dioxide emissions, the treatment of uncertainty in climate change and the approach used to discounting future costs and benefits. The report reviews current approaches in selected countries (France, Germany, Japan, The Netherlands, New Zealand, Norway, Sweden, the United Kingdom and the United States) and provides examples of good practice and recommendations for national and international policy making.


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  • Executive summary

    Transport accounts for nearly a quarter of carbon dioxide emissions from fuel combustion. The way these emissions are considered in economic appraisals of transport policies and investments in the transport sector has a significant impact on climate policy and trade-offs made between mitigation of climate change and other policy objectives. Inappropriate valuation of carbon emissions will affect the level of mitigation achieved and is likely to undermine social welfare through an inappropriate allocation of resources. There are three inter-related issues around incorporation of climate change effects in transport appraisals. They are the valuation of carbon dioxide, the treatment of uncertainty and the approach used to discount future costs and benefits.

  • Summary and recommendations

    This chapter summarises the three key aspects of the assessment of climate change effects in transport appraisal considered in this report: the valuation of carbon; the treatment of risk and uncertainty; and methods for discounting long-term effects.

  • Challenges for including climate change effects in transport appraisal

    This chapter lays the foundation for the remainder of the report. It first provides background on the nature of transport appraisal, climate change effects and the challenges for including these effects in appraisals. The remainder of the chapter defines the scope and structure of the report.

  • Estimating the social cost of CO2 emissions

    This chapter considers the alternative approaches to estimating the social cost of CO2 emissions that can be applied in cost benefit analysis (CBA). The first sections describe the analytical approaches, and how values can vary through time. The final section describes how selected OECD countries value carbon in their jurisdiction.

  • Uncertainty and transport appraisal of climate change effects

    This chapter will first clarify the difference between risk and uncertainty. It will then discuss climate change-related uncertainties and possible approaches to deal with them in transport appraisal processes.

  • Discounting long-term effects of climate change for transport

    This chapter looks at the theories and approaches to establish a discount rate for assessing longterm projects, discounting under risk and uncertainty and a comparison of how various countries have applied discount rates for climate change projects and policies.

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    • Carbon value and discount rates in Japan

      In recent years, public concerns about global warming have been growing in Japan1. In 2011, carbon dioxide (CO2) emissions from the transport sector accounts for 17.9% in Japan, which represents an increase of 5.2% compared to the 1990 level (Ministry of the Environment, Japan (MOE), 2013). To reduce the level of CO2 emissions from the transport sector, Ministry of Land, Infrastructure, Transport and Tourism, Japan (MLIT) has in recent years implemented a number of measures such as: development and promotion of environmental-friendly automobiles; promotion of smart car use, improvement of traffic conditions; improvement in freight transport efficiency, promotion of public transport use; and improving energy consumption efficiency in rail, ship and aviation transport (MLIT, 2012).

    • Carbon value and discount rates in the Netherlands

      This annex describes the current Dutch practice of incorporating the cost of carbon dioxide (CO2) emissions in Cost-Benefit Analyses (CBAs) for the transport sector. It gives a brief overview of the Netherland’s CBA guidelines and discusses the value of CO2 and discount rates used in the CBA process.

    • Carbon value and discount rates in Germany

      Having a technically sound basis of information for estimating environmental costs is important from an environmental policy making perspective as it allows an objective debate on the costs and benefits of environmental interventions. Sound environmental cost estimates make it possible to quantify and compare the economic benefits of various mitigation measures that have impact on the health and environment of current and future generations.

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