Current UK government guidance for social value of carbon

This current UK government guidance   (DECC, 2009, ,DECC 2010, DECC 2011, DECC 2012 includes central estimates for 2013 of:

  • £6/tCO2e (£22/tC) for sectors covered by the EU Emissions trading scheme (ETS) and
  • £59/tCO2e (£215/tC) for non-ETS sectors
  • Both rising over time to £334/tCO2e (£1226/tC) in 2077 at 2012 prices, thereafter declining.

Based upon target reductions of 34% compared to 1990 levels by 2020 and 80% by 2050, estimated values are considered consistent with the UK’s contribution to limiting global temperature increase to 2°C above pre-industrial levels (HM Treasury & DECC, 2012).

The effect of applying Treasury Green Book (declining) discount rates (Treasury, n.d.) is shown in the table below for selected years, illustrating how present values of future benefits in non-ETS sectors (for example; what a tonne of CO2 sequestered by a forest in a future year is estimated to be worth currently) initially declines, before decreasing again to a peak in 2054.

Social Values of carbon (£/tCO 2e at 2012 prices)
YearSectors covered by EU ETSSectors not covered by EU ETS
Central Price of CarbonDiscounted Price of CarbonIndex (2013 Discounted Price =100)Central Price of CarbonDiscounted Price of CarbonIndex (2013 Discounted Price =100)
2013 6 6 100 59 59 100
2020 9 7 112 65 51 87
2030 76 42 705 76 42 72
2040 147 58 969 147 58 99
2050 217 63 1053 217 63 107
2060 289 62 1042 289 62 106
2070 327 52 877 327 52 89
2080 332 40 663 332 40 67
2090 318 28 476 318 28 48
2100 291 20 341 291 20 35

The impact of tighter targets

Were accelerating global emissions, more severe than anticipated impacts, non-negligible probabilities of catastrophic impacts, or a desire for greater certainty that critical thresholds will not be exceeded, to lead to tighter targets being adopted, estimates of the social value of carbon would need to be revised upwards.

Research report

Forests and carbon: valuation, discounting and risk management (PDF-1168K)
Reviewing methods to value carbon over time, examining approaches for dealing with risk and considering approaches that could be used in extending standards to forestry more generally in voluntary carbon markets in the UK.

Research summary

The EU Emissions Trading System: Opportunities for Forests? (PDF-124K)
Brief research summary including background, objectives, methods, findings and recommendations.

Contact

For further information contact Gregory Valatin