The different approaches
Valuing carbon is complex and uses different approaches according to whether a societal or market perspective is taken. Estimating the value of carbon from a societal perspective can be based on:
- The marginal damage cost of emissions – also termed the ‘social cost of carbon’ (SCC) –, or
- The marginal abatement cost (MAC) of reducing emissions or sequestering carbon, or
- The carbon price or pollution tax required to meet a given climate stabilisation goal.
A wide range of estimates of the social value of carbon exists, spanning at least three orders of magnitude from zero to over £1000/tC, and reflecting different methods, assumptions, models, and uncertainty concerning future impacts.
Early emissions reductions
These allow more time to avoid ‘dangerous’ climate change if impacts are worse than expected. These benefits have not been taken into account in valuing carbon.
Were they accounted for, adopting a declining present value of carbon over time (as initially the case with the discounted values under current UK government guidance) may be preferable to a constant (or increasing) value over time.
Forests and carbon: valuation, discounting and risk management (PDF, 760.9kB) 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.