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.
| Year | Sectors covered by EU ETS | Sectors not covered by EU ETS | ||||
|---|---|---|---|---|---|---|
| Central Price of Carbon | Discounted Price of Carbon | Index (2013 Discounted Price =100) | Central Price of Carbon | Discounted Price of Carbon | Index (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