Carbon Value Analysis Tool (CVAT)

The Carbon Value Analysis Tool (CVAT) is a screening tool to help companies integrate the value of carbon dioxide emissions reductions into energy-related investment decisions. The tool has two main purposes:

• To test the sensitivity of a project’s internal rate of return (IRR) to “carbon value” (the value of GHG emissions reductions). CVAT integrates this value into traditional financial analysis by ascribing a market price, either actual or projected, to carbon emissions reductions.
• To facilitate the development of emissions reduction strategies by developing a Marginal Abatement Cost Curve (MACC) across a portfolio of projects. CVAT ranks projects so managers can prioritize them according to their implicit cost per tonne of carbon emission reduction.

CVAT estimates direct and indirect emissions reductions using standards developed by the GHG Protocol Initiative. CVAT can also run a Monte Carlo analysis for key project variables such as carbon value, providing insights into the possible range of a project’s IRR.

To analyze a project, CVAT asks for four types of information:

• basic project information,
• some details about the project’s design and operation,
• assumptions about future energy prices, and
• foreign exchange rates (for projects denominated in currencies other than US dollars).

CVAT is designed for use by many types of professionals, including project managers, engineers and energy managers in large companies.