Policies and projects are required to value any changes in emissions. This ensures that project and policy appraisals account for their climate change impacts: where a policy reduces (increases) emissions valuing, this change will increase the benefits (costs) of the policy.
Government has agreed a set of carbon values to be used in policy appraisal and evaluation, in accordance with HM Treasury’s Green book and the current Inter-departmental Analysts Group (IAG) guidance. A brief guidance on how to use current carbon values is available:
The IAG guidance for policy appraisal page provides further guidance and an excel toolkit for using the carbon values in policy appraisal.
Background information on the recent updates to traded carbon values is available:
For modelling energy market production and investment decisions a further set of traded carbon prices have been developed:
Carbon valuation in UK policy appraisal: A revised approach
DECC's approach to carbon valuation underwent a major review which concluded in July 2009. The new approach moves away from a valuation based on the damages associated with climate change. Instead, it refers to the cost of mitigating emissions. More precisely, the new approach will set the valuation of carbon at a level consistent with the UK short and long-term targets.
Previously, we have based our valuation of carbon on estimates (drawn from the Stern Review on the Economics of Climate Change) of the damages associated with the impact on the climate caused by emissions. This is the so-called Shadow Price of Carbon (SPC).
As part of the process of reviewing our carbon valuation approach, DECC invited comments from expert academics in this area. Peer review comments described the proposed revisions. To help DECC economists finalise the appropriate approach for valuing carbon in UK policy appraisal, we asked peer reviewers for their thoughts on the document. These, and the response by DECC economists, are published:
Guidance on estimating carbon values beyond 2050: an interim approach
In June 2010, Government set out an interim carbon value profile over the 2050-2100 period to be used for economic appraisal consistent with the agreed carbon values up to 2050.