Policy paper

Shadow price of carbon: economic appraisal in the UK

A note from Defra on the difference between the social cost of carbon and the shadow price of carbon, plus peer reviews and response.

This was published under the 2005 to 2010 Labour government

Documents

The Social Cost Of Carbon And The Shadow Price Of Carbon: What They Are, And How To Use Them In Economic Appraisal In The UK

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Peer Review: Paul Watkiss

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Peer Review: Alex Bowen

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Peer Review: David Newbery

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Peer Review: Dieter Helm

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Peer Review: Paul Ekins

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Peer Review: Simon Dietz

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Government economists’ response

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Details

This note sets out:

  • a definition of the social cost of carbon, hitherto used in UK government appraisals to reflect the external costs of greenhouse gas emissions;
  • the rationale for adopting a shadow price of carbon (SPC) for use in policy and investment appraisals across UK government; and the factors which the SPC reflects which the social cost of carbon (SCC) does not;
  • our approach to setting the appropriate level for the shadow price of carbon (SPC), now and in the future; and
  • how the SPC should be used in policy advice, and why it differs from other carbon price and cost concepts.
Published 1 December 2007