The PAL Carbon 1 Year index is a measure of the expected average financial loss and damage attributable to carbon emissions, for one given year. It is the expected average loss per tonne of CO2 emissions occurring in that year. It is PAL’s preferred methodology to be used for carbon audits and historical and forward pricing. It is directly derived from the PAL cumulative carbon price index by differentiating the equation exp (0.02 × (t – 1896)) to obtain:
PAL-1Y = (0.02 × D/C + 1) × exp (0.02 × (t – 1896))
D = cumulative carbon emissions since (reference point 1945)
= 1500 gigatonnes CO2
C = emissions in given year (approximately 37 gigatonnes CO2 in 2015).