The shadow price of carbon (SPC) is used to value the expected increase or decrease in emissions of greenhouse gas emissions resulting from a proposed policy. The SPC reflects the damage costs of climate change caused by each additional tonne of greenhouse gas emitted—converted into carbon dioxide equivalent (CO2e) for ease of comparison. Supplementary guidance to the Green Book has been published, and the SPC should be used in all policy and project appraisals across government with significant effects on carbon emissions.
The value of the SPC is dependent upon the year the carbon is abated/emitted and rises over time to account for observed (and assumed) inflation, and at 2 per cent. a year to account for rising damage costs from higher greenhouse gas concentrations. The SPC in 2008 is £26.50 per tonne of CO2e.