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Monetary Valuation of Emissions in Implementing Environmental Policy
Author(s) -
Davidson Marc D.,
Boon Bart H.,
Swigchem Jessica
Publication year - 2005
Publication title -
journal of industrial ecology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.377
H-Index - 102
eISSN - 1530-9290
pISSN - 1088-1980
DOI - 10.1162/108819805775248016
Subject(s) - shadow price , marginal abatement cost , economics , valuation (finance) , environmental policy , shadow (psychology) , marginal cost , industrial ecology , government (linguistics) , unit (ring theory) , monetary policy , reduction (mathematics) , environmental economics , natural resource economics , public economics , greenhouse gas , microeconomics , macroeconomics , finance , sustainability , psychology , mathematical optimization , ecology , linguistics , philosophy , mathematics education , mathematics , geometry , psychotherapist , biology
Summary At various levels of environmental policy making there is a demand to translate polluting emissions into monetary units. In the so‐called reduction cost approach, based upon policy targets, polluting emissions are expressed in monetary terms by determination of the marginal unit reduction cost at the emission target level. This approach provides shadow prices for emissions by which it can be established whether a certain measure or technology belongs to the most efficient set of measures by which the policy targets can be reached. This article argues that, if clear (generic) government targets such as national emission reduction targets exist for an emission, shadow prices derived by this method are to be preferred to shadow prices derived by other methods for decisions at the project (implementation) level. By application of the reduction cost approach, implementation decisions can be made that are both cost‐effective and consistent with government policy.