Carbonvestments: appraising investments in a carbonomics environment

Polluting the environment with carbon emissions will likely be no longer free. Early movers which start incorporating carbon thinking in business decisions will be winners in the low carbon future. Companies subject to carbon caps under a carbon trading scheme can either invests in carbon sequestration project and or buy carbon credits to offset their carbon liabilities. While Net Present Value (NPV) has been recorded as the most popular appraisal technique used across the globe for project valuation purposes, finance theorist suggests that using real options (RO) analysis is a more superior technique to value investment opportunities. Using case study data, this paper reveals how RO approach provides more strategic insights than traditional NPV in valuing carbon sequestration investments (termed carbonvestments)