Carbon Enterprise Value

This is a bit of a geeky post.

I recently heard of Carbon Enterprise Value, a methodology developed by Lime Rock New Energy on the subject of Green House Gases emissions avoidance - and I must say I was fascinated. The basic premise is that carbon emissions avoidance has a greater value (or are more important) the closer they are to the present day - meaning that, as you calculate now how much CO2 (or other GHG) a project avoids being put in the atmosphere, the future emissions are less important than the ones you avoid now. This makes sense (at least under some lenses), because of the inherent risk of any project.

Yes, the concept and calculations are quite similar to the basic (and always reliable) Discounted Cash Flow model used in Finance. So much so that Lime Rock New Energy uses the financial rate of DCF discounting on this new CEV concept - and here lies the biggest question mark of the model, as one may question if it makes sense to use a financial measure (that on itself is quite complex) to discount carbon emissions (a non-financial topic).

Still, the measure and approach seem incredibly valuable. It is a comparable, "easy" to calculate tool that can be used in any GHG emissions avoidance project - and can even be used as part of one's valuation, if you consider the market value of carbon emissions.