Valuing Carbon: From theory to practice and back (again)

Professor Michael Grubb, The Carbon Trust 

There are two main discourses around carbon, the first relating to what the cost of carbon should be. It is suggested that setting a legally-defined long term 2050 target is consistent with the literature on the economics of the problem. Secondly, what instrument is best to put a price on carbon is discussed, with a recognition that a rational approach needs to be international, but has to take account of additionality and political economy. It is suggested that basing a UK carbon price instrument on the EUETS makes sense, if the limitations of the EUETS are acknowledged and can be addressed over time. It is recognised that climate change creates some fundamental dilemmas in terms of how to enable investment in low carbon, with current theories not being adequate for the needs of policy; also it is suggested that neither the EWP nor the UK Climate Change Bill really solve the problem of low carbon investment security.