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Adapting Transport Policy to Climate Change

Carbon Valuation, Risk and Uncertainty

image of Adapting Transport Policy to Climate Change

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

International Transport Forum

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.

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