Accounting for environmental externalities in local climate action : a methodological proposal for socio-economic abatement cost assessment

Sammanfattning

Local authorities face ambitious climate targets under tight budgets, requiring tools to prioritize actions by cost-effectiveness beyond simple financial metrics. This thesis introduces a methodology for calculating “socio-economic abatement cost”, the cost per ton of CO₂ avoided that integrates non-market environmental externalities, to guide investment decisions. The approach extends traditional abatement cost analysis by monetizing co-benefits (e.g.improved air quality, public health gains) and external costs using Life Cycle Assessment (LCA) data and economic valuation coefficients. A case study on Grenoble Alpes Métropole illustrates the method through three emissions-reduction measures: building energy retrofits, heating system upgrades (boiler replacement), and electric vehicle adoption, compared against baseline scenarios. Accounting for externalities significantly alters abatement costs results, indicating net societal benefits. For example, building retrofits yielded roughly –1,233 € per tCO₂e avoided when health and environmental co-benefits are monetized, versus a positive total cost per ton under a conventional calculation. All three measures turned out to have negative socio-economic abatement costs, meaning their overall benefits to society outweigh their costs. A sensitivity analysis (varying carbon price, benefit valuations, energy costs) confirmed the robustness of the model while underlining the importance of regularly updating key assumptions. Overall, the thesis demonstrates that a holistic abatement cost framework that internalizes externalities gives local authorities a more accurate basis for prioritizing climate actions, often revealing “no-regret” investments with net positive social returns. Further research is needed to improve the monetization of LCA indicators and reduce uncertainties inherent to this framework.