Climate is strongly influenced by changes in the atmospheric concentrations of a number of gases that trap heat radiated from the earth's surface (the 'greenhouse effect'). Carbon dioxide has been singled out as the most important transport induced greenhouse gas having a direct impact on global warming. Climate change is now widely recognised as a threat to the environment. In broad terms, the UK has committed itself to reduce emissions of key greenhouse gases by 12.5% from 1990 levels by 2010, though there are different targets for individual pollutants. Carbon dioxide (CO2) emissions are taken as a proxy in STAG for global air quality. The Scottish Government has set itself a further target of exceeding the reduction in the Scottish share of UK carbon emissions by 1 million tonnes of carbon in annual savings by 2010. In addition, the Government Economic Strategy, published in November 2007, presents a set of national targets, that aim at ensuring that the Government's Purpose is met. Among them, two environment specific targets, promoting sustainability:
Following the Stern Review, the issue of CO2 emissions has become significantly more prevalent and there are moves to monetise the impact of CO2 emissions, in terms of the Shadow Price of Carbon (SPC). This is a highly complicated area which is being examined at a high level within Government. As a result of Stern Review, there is an argument that standard Green Book discount rates are not appropriate when dealing with CO2. At present standard discount rates (see Annex 6 of the Green Book) should be used.
DEFRA recently released interim guidance on the valuation of Greenhouse gas emissions (http://www.defra.gov.uk/enviro
An important point is that the unit of account is now CO2 (equivalent) rather then carbon (C equivalent).
