Forests and carbon: valuation, discounting and risk management

Carbon valuation, discounting and risk management are important in ensuring that effective incentives are put in place to tackle climate change, and in comparing the relative merits of climate mitigation activities over time. Approaches applied in different contexts, including in relation to permanence issues, are reviewed in order to help inform development by the Forestry Commission of a Code of Conduct for forestry carbon projects in the UK. An overview of current UK Government guidance on valuing carbon for policy appraisals is provided and the implications of adopting the UK Treasury’s declining discount rate protocol recommended in the Green Book discussed. It is noted that at present, there is little relationship between the value to society of reducing greenhouse gas emissions or sequestering carbon and the market price.