Heathrow expansion not great value after all

One of the best things about being a monetising economist is getting to pretend that ideology has nothing to do with anything. Monetisers, for those of us lucky enough not to have to deal with them, are tasked with asigning a value to something which has no obvious price. Cheese, for instance, has a value: a block of it might be worth one pound, or two pound, or eight pound if bought from a fromagerie in Knightsbridge. But community? Or a quiet park in the city? Or time? What are they worth?

To answer that, you turn to a monetiser, who will weigh everything up and then find a way of pricing it cheap enough that some developers will still get to pave all over it and erect a car park. That 10th C Norman church? £10,000 to you squire. The cost of climate change? Too cheap to prevent the sort of behaviour which might prevent it happening.

But a concerted effort by those greenies at DECC has revised the value of carbon, increasing it as time goes on. A tonne of CO2 now isn't worth much - about the price of a night out in Soho - but by 2050 it's risen to the cost of a Fiat Panda, because a tonne emitted in 2050 is more likely to put us over our carbon limit and require another cut somewhere else. DECC's revision has made the value of carbon equivalent to the cost of achieving that extra reduction. Emit CO2 now or in 2050 and you'd pay for someone else to reduce their footprint to make up for it.

So far, so gravy. But then those clever boffins at the Liberal Democrats ran the cost of carbon through the Heathrow calculations. They discovered that the marked increase in the cost of carbon basically wiped out any economic benefits accrued from the third runway. In earlier versions the cost of the 181m tonnes of carbon dioxide the runway would emit between now and 2080 was £4.8b. Now it had risen to £9.3bn to 2080, wiping out the £5b benefits.

What does the Government think? Not much sadly: according to a recent PQ they haven't had a chance to look at the new benefit-cost ratio, but are pretty convinced that it will still be robust. Nothing to see here then, time to move along.