Publication Date

2018-05-14

Document Type

Honors Project

Degree Name

Bachelor of Arts

Department

Environmental Science and Policy

Advisors

Alexander Barron

Keywords

Proxy carbon price, Carbon price, Climate change, Environmental economics, Institutional change, Sustainability, Sustainability-Massachusetts-Northampton, Smith College-Finance, Climatic changes-Economic aspects, Carbon offsetting, Emissions trading-Economic aspects, Carbon taxes

Abstract

This thesis to Design a Proxy Carbon Price Strategy for Smith College was written to internalize the social cost of carbon emissions into financial decision-making. The reason a carbon price is necessary is because the current market price for fossil fuels omits the social cost of carbon emissions, which contribute to climate change (IPCC, 2014; Stern, 2008) A proxy carbon price is a virtual price - meaning it does not apply an actual fee - to acknowledge the social cost of carbon in financial decisions. In general, the proxy carbon price can be used to evaluate investment or purchase decisions. The institutional driver for this thesis derives primarily the Study Group on Climate Change (SGCC) request to “Develop an internalized cost of carbon emissions—such as a carbon-proxy price—to help guide major capital budget management and other decision- making processes” (SGCC, 2017). This thesis identified that many business and governments are using carbon price strategies, but only four academic institutions are doing so. As a consequence, there is a lack of peer-reviewed literature, which must be filled through experimentation and publication. In order to understand how a proxy carbon price might be implemented at Smith College this thesis identified and experimented with strategies to incorporate the proxy carbon price into financial decisions, using a mix of background research, stakeholder interviews, and pilot examples. Based on my research into possible carbon prices, the Smith College Committee on Sustainability (COS) recommended a proxy carbon price within the range of $60-$75 per MTCO2e 1(COS, 2018) which was implemented here as a price starting at $70 per MTCO2e. A pilot project on Renewable Energy Credit procurement demonstrated the general application of the proxy price for placing a value on avoided carbon emissions. For cases that include capital and operating costs, the proxy carbon price should be incorporated into the Lifecycle Cost method for financial decision-making. A Proxy Carbon Lifecycle Cost method can be performed using an Excel tool that was adapted from the Harvard Lifecycle Cost Calculator (Harvard, 2017). Its application was demonstrated with a pilot project on Washburn House, which illustrated the cost- and carbon- saving options of energy retrofit options. This thesis provides 8 recommendations regarding a Proxy Carbon Price Strategy for Smith College.

Rights

2018 Breanna Jane Parker. Access limited to the Smith College community and other researchers while on campus. Smith College community members also may access from off-campus using a Smith College log-in. Other off-campus researchers may request a copy through Interlibrary Loan for personal use.

Language

English

Comments

114 pages : illustrations, color map. Includes bibliographical references (pages 104-110)

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