Current (2020) UK government guidance on the social value of carbon

Current UK government guidance (DBEIS, 2019b) on what social values to apply in policy appraisal and how to apply them includes central estimates for 2020 of:

• £14/tCO₂e (£51/tC) for sectors covered by the EU Emissions trading scheme (ETS) and
• £69/tCO₂e (£254/tC) for non-ETS sectors
• Both are set to rise over time to £355/tCO₂e (£1303/tC) in 2075-2078 at 2018 prices, thereafter declining.

The guidance is based upon a ‘target consistent’ approach which takes account of the marginal abatement cost required to reach a specified emissions reduction target (DECC, 2009). Values were initially estimated based upon target reductions of 34% compared to 1990 levels by 2020 and 80% by 2050, considered consistent with the UK’s contribution to limiting global temperature increase to 2°C above pre-industrial levels (HM Treasury & DECC, 2012). Recent adoption of a net zero emissions target by 2050 could affect future guidance.

The effect of applying Treasury Green Book (declining) discount rates (Treasury, 2018) 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 to 2030, before increasing to a peak in 2052-57, thereafter declining again.

Table: Social Values of carbon (£/tCO ₂e at 2018 prices)

Year	Sectors covered by EU ETS			Sectors not covered by EU ETS
	Central Price of Carbon	Discounted Price of Carbon	Index (2020 Discounted Price =100)	Central Price of Carbon	Discounted Price of Carbon	Index (2020 Discounted Price =100)
2020	14	14	100	69	69	100
2030	81	57	414	81	57	83
2040	156	78	566	156	78	113
2050	231	82	594	231	82	119
2060	307	81	588	307	81	118
2070	348	69	495	348	69	99
2080	353	52	374	353	52	75
2090	338	37	266	338	37	53
2100	309	26	186	309	26	37

The impact of tighter targets

Were tighter targets to be adopted (e.g. due to: accelerating global emissions; more severe than anticipated impacts; greater likelihood of catastrophic impacts; or a desire for greater certainty that critical thresholds will not be exceeded), the estimates of the social value of carbon would need to be revised upwards.