Cost of carbon stays the same - for now

In 2002, the Government published an estimate of the marginal damage costs of climate change - known as the "social cost of carbon" - to provide a yardstick for assessing cost-effectiveness of abatement policies.

The current figure is £70 per tonne of carbon, within a broad range of £35-140. Some environmental economists claimed this is too high, and the Environment Department (DEFRA) launched a review in 2003. However, in a policy statement issued in late November DEFRA confirmed the figure will not change "for the time being".

The conclusion follows a report by the Stockholm Environment Institute, which noted that the cost of carbon estimates range from zero to over £1,000/tC. The report concluded that a lower benchmark of £35/tC was "reasonable" under "a moderate degree of risk aversion". It was "more difficult to deduce" an upper benchmark, but the risk of higher values is "significant".

DEFRA plans to issue a final position statement following the completion of another report by AEA Technology in the spring. The reports will feed into the Treasury's review of the economics of climate change (ENDS Report 369, p 5 ).

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