Paying for carbon emissions reduction

This paper explores how much British citizens might be willing to pay for carbon emissions reduction, and the implication of this for climate change policies. Much of the current valuation of carbon focuses on cost measures, notably the marginal social cost of carbon, which measures the damage imposed by each unit of carbon emitted; and the marginal abatement cost, which reflects the cost of reducing emissions. These measures reflect how much people should pay or have to pay, but there is relatively little policy research on how much people are willing to pay, a measure of the value they place on carbon emissions reduction. This paper begins to address this research gap. The willingness to pay method reflects people's subjective welfare, so the method is useful for putting a value on public goods. This paper draws on the willingness to pay values from a suite of four stated choice studies in the water sector, and seeks to extend the use of these values for wider climate change policies. Across the studies, the values that the public placed are on the order of hundreds of pounds per tonne of carbon dioxide reduced. This value is an order of magnitude higher than the "official" damage estimates of carbon (i.e. what the public should pay), suggesting that there is an opportunity for a large consumer surplus (a social benefit) even if a carbon tax is introduced to pay for the damages.