From gov.uk

The government (BEIS) has published a revised approach to valuing greenhouse gas (GHG) emissions in policy appraisal, following a cross-government review during 2020 and 2021.

What are carbon values?

Greenhouse gas emissions values (“carbon values”) are used across government for valuing impacts on GHG emissions resulting from policy interventions. They represent a monetary value that society places on one tonne of carbon dioxide equivalent (£/tCO2e). They differ from carbon prices, which represent the observed price of carbon in a relevant market (such as the UK Emissions Trading Scheme).

The government uses these values to estimate a monetary value of the greenhouse gas impact of policy proposals during policy design, and also after delivery.

Why value GHG emissions in policy appraisal?

The fundamental purpose of assigning a value to the GHG emissions impacts that arise from potential government policies is to allow for an objective, consistent and evidence-based approach to determining whether such policies should be implemented. Carbon values are used in the framework of broader cost-benefit analysis to assess whether, taking into account all relevant costs and benefits (including impacts on climate change and the environment), a particular policy may be expected to improve or reduce the overall welfare of society.

To reach net zero in 2050 and meet our 5-yearly carbon budgets, a robust approach to valuing emissions is vital to ensure that government takes full account of climate change impacts in appraising and evaluating public policies and projects, whether those policies are intended to reduce emissions or are likely to have the effect of increasing emissions. Such policy decisions often involve making choices between competing policy objectives.

Assigning a value to carbon helps to ensure that such choices are made in a transparent fashion and in a way that seeks to be cost-effective for UK society as a whole.

Valuing emissions impacts explicitly when making policy decisions helps to:

• ensure the climate impacts of policies are fully accounted for
• ensure consistency in decision making across policies
• improve transparency and scrutiny of decision making

Valuing emissions impacts robustly is important, however it is often the case that some of the most strategically important benefits of climate policy cannot always be quantified. For example; strengthening of decarbonisation supply chains; or increases in the UK’s resilience to deal with extreme climate events. As a result, quantified benefits of carbon saving policies can underestimate the true benefits. Therefore, policy makers and decision makers should consider all qualitative and quantitative evidence in the round as set out in the Green Book, even if a project has a low estimated benefit-cost ratio.

Greenhouse gas emissions should be valued for all policies that may have an impact on emissions, whether these impacts are positive or negative. This includes policies whose primary objective is not related to progressing the net zero target, but where there are indirect impacts on emissions.

It should be stressed that the carbon values discussed in this paper apply to all types of policy, providing there is some impact on emissions. It is not the aim of this document to discuss how these policies should be designed but rather to provide carbon values to be used in the economic appraisal or evaluation of these policies. Detailed practical guidance for analysts on how to apply the carbon values in appraising policies is available in the Green Book Supplementary Guidance: Valuation of Energy Use and Greenhouse Gas Emissions for appraisal.

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