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Carbon price

Hello everyone 
I'm working on the carbon sequestration model . I have found many sources of carbon price with big diferrences . Could you please suggest me an overage price that can be used ? 
Thank you 
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  • RGriffRGriff Member
    edited August 2017
    The wide ranges you are seeing in prices is partly attributable to their being both market and social cost of carbon approaches to measuring the value of carbon sequestration, but also can be attributed to the continued difficulty in predicting future climate and economic states. I'll largely address the former, but the latter is also important and you'll see it as a major theme in recent research on this topic. 

    Market-based prices for carbon are generally relevant if a private person, company, or NGO, is choosing what they should do with their land in a "return on investment" context; i.e. based on a financial return does it make sense to develop it or sell carbon credits into a market and conserve it? In this case it is a private entity making a decision where they principally care about their own well-being. 

    When it comes to public policy made by represented officials or their delegated appointees, this framing generally makes less sense as these folks are trusted with increasing "social welfare" - in short, the aggregate well-being of the population. Using a market price from a carbon trading market does not do that, as the price of carbon in these markets is set by unique supply and demand conditions in that market that generally do not reflect the damage associated with carbon emissions but more likely reflect tradeoffs in the technological means of compliance to pollution regulation. Given this, you can imagine a situation where a carbon market price that is lower than the social damage from that carbon could result in a poor social welfare outcome if a regulator makes a decision based on carbon market prices. Carbon market prices around the world are generally seen as too low for a wide variety of reasons.

    A result of all of this is that the avoided damage approach is generally better aligned with decisions that are a matter of public policy. The user's guide provides guidance for implementing this. In addition, these three price tables reflect carbon prices for a 2.5%, 3%, and 5% discount rate as set in the latest guidance by the Interagency Working Group on Social Cost of Greenhouse Gases. They can be used as a direct input in the InVEST Blue Carbon model and will be released as sample data in the 3.4.0 release of InVEST. We are intending to update the other carbon models in InVEST with a consistent valuation module that includes the ability to use a price table, but in the meantime for the Carbon model you might approximate the "Annual Rate of Change in Price of Carbon" for the "Market Discount in Price of Carbon" as follows:

    ARCPC MDPC
    2.467 5
    2.025 3
    1.620 2.5

    These are simply the average increase in the marginal cost of a ton of carbon emission over the 2010 - 2050 time period given on pg. 25 of the linked guidance doc. Remember, these are in 2007 US$, so if your analysis year is different, you can inflate/deflate the NPV output of InVEST to the appropriate year using a measure of inflation, such as the Consumer Price Index.  

    Regards,
    Rob

    Post edited by RGriff on
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