Carbonvestments: Appraising Investments in a Carbonomics Environment

By Janek Ratnatungaa, Chris D’Souzab

aCalwest University, USA

bInstitute of Certified Management Accountants, Australia


In 2011, Australia introduced a Carbon Pollution Reduction Scheme (or CPRS) that was a cap-and-trade emissions trading scheme for anthropogenic greenhouse gases. It clearly indicated to companies that polluting the environment with carbon emissions will no longer be free. 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 techniques to value investment opportunities. Using case study data of an early mover in a CPRS scheme, this paper reveals how RO approach provides more strategic insights than traditional NPV in valuing carbon sequestration investments (termed carbonvestments).

Keywords: Carbon Emissions; Carbonomics; Net Present Value; Project Valuation; Real Options Analysis


About Prof Janek Ratnatunga 1129 Articles
Professor Janek Ratnatunga is CEO of the Institute of Certified Management Accountants. He has held appointments at the University of Melbourne, Monash University and the Australian National University in Australia; and the Universities of Washington, Richmond and Rhode Island in the USA. Prior to his academic career he worked with KPMG.

1 thought on “Carbonvestments: Appraising Investments in a Carbonomics Environment”

  1. Pingback: Institute of Certified Management Accountants (ICMA) - Academy of Finance

Comments are closed.

Scroll to Top