The Shadow Price

Currently, the college estimates energy costs associated with new construction projects to determine whether to invest in energy saving technologies. These projected costs don't currently account for the social cost of the carbon emissions that are felt beyond Swarthmore. The faculty and staff reading group's proposal for the Carbon Charge included a new shadow pricing policy. The shadow price would be an additional cost added to the base project costs in determining which options the school should pursue.

For example, as the college is constructing a new building, it may consider heating the building either with a geothermal well or with natural gas boilers. If the baseline costs are shown in blue, then it will be cheaper to heat the building with natural gas. With the addition of the shadow price, a lifecycle social cost of the carbon associated with either option would also be calculated and added to the projected costs, in gray. In this case, because geothermal heating has a smaller carbon footprint, it would become the "cheaper" option, and the college would pay the higher upfront costs to install a geothermal well. 

 

You can download the most recent version of Swarthmore's lifecycle cost analysis calculator here. (Last updated August 16, 2017)