How far off is the market price because it does not account for carbon emissions?
The following section describes the metrics on Emission Price Gap that were embedded in Deliverable 6.3.
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New metric proposed: Carbon price gap
The value of output for agri-food sectors often does not reflect all the costs incurred. For example, costs associated with polluting the environment and reducing bio-diversity is not paid for by either producers or consumers. While there are many externalities associated with agricultural production and processing, we hope to take a first step in this direction. Emissions generated per unit of sector output, are valued at a fixed carbon price and added to the market price of sector output.
With increasing concerns from policy makers about true price of food, only the sectors that can reduce the gap are likely to thrive. Unlike the other objectives – value-added, jobs and wages and productivity – the gap between the true price and market price is a measure that policies aim to reduce. Therefore the best performer in this area is a region that achieves least value for this gap.