2024 Guidance Note on Shadow Price of Carbon in Economic Analysis (English)

The use of shadow prices of carbon (SPCs) in the economic analysis is a corporate commitment1 for all investment project financing by the International Bank for Reconstruction and Development (IBRD) and the International Development Assistance (IDA) that is subject to greenhouse gas (GHG) emissions accounting. GHG emissions accounting is undertaken for IBRD and IDA investment finance projects in the Global Practices (GPs) with WB-approved GHG accounting methodologies. This guidance note provides a corporate approach to incorporating carbon externalities in the scenarios considered in the economic analysis. One objective is to support the implementation of the Paris Agreement and the achievement of its objectives. To that end, SPC trajectories representing the path for carbon emissions that are consistent with achieving the temperature objective of the Paris Agreement have been selected. In practical terms, it is recommended to use the SPC values proposed by the High-Level Commission on Carbon Prices, led by Joseph Stiglitz and Nicholas Stern. The prices are extrapolated beyond the 2030-time horizon and deemed consistent with achieving the temperature goal of the Paris Agreement.