What Value Do We Attach to Climate Action

In the course of policy‑making to mitigate the effects of climate change, economists seek to attach a monetary value to actual or foregone carbon emissions. Charting a long‑term pathway for carbon prices involves measuring the most cost‑effective way to reduce emissions, assigning value to long‑term investment, and having a benchmark against which to set priorities. The carbon neutrality target, as set out in the 2015 Paris Agreement, calls for higher carbon values in monetary terms than those historically obtained under Factor 4 targets derived from a cost‑benefit approach. This paper looks at developments in carbon values over time, with an emphasis on their underlying methodologies and the role of uncertainty in valuation. It then sets out how carbon values can be used in policy‑making to mitigate the effects of climate change.