To ask the Chancellor of the Exchequer what monetary value is assigned by his Department to the social cost of carbon in assessing Government projects; what value was recommended by the Stern review on climate change; and if he will make a statement. (128468)

I have been asked to reply.

In January 2002, “Estimating the Social Cost of Carbon Emission” a Government Economic Service (GES) working paper, was published jointly by DEFRA and the Treasury. It suggested £70 per tonne of Carbon (tC) (within a range of £35 to £140 per tC) as an illustrative estimate for the global damage cost of carbon emissions. This would rise by £1 per tC per year in real terms to reflect the increasing marginal cost of emissions over time. The GES paper also recommended periodic reviews of the illustrative figures as new evidence became available. The UK was almost unique in issuing official guidance on the social cost of carbon (SCC). The scientific and socio-economic uncertainties behind these calculations are very significant.

The Stern Review estimates the SCC for a scenario of unmitigated climate change averaging over time and over different possible outcomes, is $85 per tCO2 in year 2000, rising over time. The equivalent value in 2007 might be around £264-269 per tC.

However, the Stern Review also notes that, if the world converges on a trajectory towards stabilisation at a level that reduces the risks and damages of climate change, the SCC will be lower, perhaps $25-30 per tCO2 in year 2000. Again, this would rise over time. The equivalent value in 2007 might be around £90-95 per tC.

Economists from relevant government departments are currently developing revised guidance on the calculation and use of shadow prices of carbon in informing UK policy decisions in the light of the Stern Review work on the social cost of carbon as well as previous work by DEFRA in this area. The aim is to publish revised guidance by the summer.