The component encompasses the annual external damage costs due to greenhouse gas (GHG) emissions. These include emissions of carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFWK), perfluorohydrocarbons (PFKW) and sulphur hexafluoride (SF₆) as listed in the Kyoto protocol. They are converted into CO₂ equivalents (in prices of 2010).
The present ways of production and living especially in industrialized countries causes GHG emissions on a large scale (primarily through the combustion of fossil fuels but also through factory farming, for example) that are absorbed by the atmosphere.