CVal: A Spreadsheet Tool 

to Evaluate the Direct 

Benefits and Costs of 

Carbon Sequestration 

Contracts for Managed 

Forests 

E.M. (Ted) Bilek

Peter Becker 

Tim McAbee

United States

Department of

Agriculture

Forest Service

Forest

Products

Laboratory

General

Technical

Report

FPL–GTR–180
February 2009

Bilek, E.M. (Ted); Becker, Peter; McAbee, Tim. 2009. CVal: a spreadsheet 

tool to evaluate the direct benefits and costs of carbon sequestration contracts for managed forests. General Technical Report FPL-GTR-180. Madison, WI: U.S. Department of Agriculture, Forest Service, Forest Products 

Laboratory. 27 p.

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Abstract

This documentation is meant to accompany CVal, a downloadable spreadsheet tool. CVal was constructed for foresters, other land management advisors, landowners, and 

carbon credit aggregators to evaluate the direct benefits and 

costs of entering into contracts for carbon sequestered in 

managed forests and forest plantations. CVal was designed 

to evaluate Exchange Forestry Offset (XFO) contracts on 

the Chicago Climate Exchange (CCX), although the methodology could be adapted for other trading mechanisms and 

agricultural sequestration projects. 

Both the documentation and the spreadsheet tool are downloadable from http://www.fpl.fs.fed.us/documnts/fplgtr/

fpl_gtr180/fpl_gtr180.html. Versions of CVal are available 

both with and without macros. Although all calculations can 

be done in the version without macros, the macros version 

has buttons and automations that make the calculations 

convenient.

Our general finding is that it is critical in managed forest 

projects to determine whether carbon accumulated prior to 

entering the contract can be counted. Depending on the contract year and length, this can triple the revenue from CCX 

contracts. If it is not possible to count pre-contract year 

carbon, then it may not be economically worthwhile to enter 

the program unless it is extended. Other critical variables 

having a large effect on the overall profitability include the 

trade price of sequestered carbon, the carbon sequestration rate, and the hurdle rate (the minimum required rate of 

return on investment) used. Up-front and annual costs are 

important, but overall profitability is not quite as sensitive 

to these costs as it is to the previously mentioned variables. 

Users are expected to enter their own data to evaluate the 

feasibility of specific projects.

Keywords: Carbon sequestration, carbon valuation, carbon 

contracts, carbon credits, Exchange Forestry Offset (XFO) 

contracts, Chicago Climate Exchange (CCX), decision support, discounted cash flow analysis

Acknowledgments

The authors thank Francisco Aguilar, Richard Birdsey, Sarah 

Hines, Dave Krog, and Steve Ruddell for their thoughtful 

and helpful reviews of the CVal program and documentation. Their constructive suggestions improved both the 

program and the report. However, any mistakes or errors are 

the responsibility of the authors, who should be contacted 

directly. You may reach the authors by email as following: 

Ted Bilek, tbilek@fs.fed.us; Peter Becker, wongbeck@

yahoo.com; Tim McAbee, tmcabee@landmarksystems.com.

Contents

Page

Introduction...........................................................................1

 Regulated and Voluntary Markets for Sequestered 

 Carbon...............................................................................1

 Available Tools..................................................................2

 Capabilities of CVal ..........................................................3

 CVal Features....................................................................3

CVal Location and Versions..................................................4

 Summary Financial Information.......................................4

 Break-Even Analysis.........................................................5

 Cash Flow Inputs..............................................................6

 Sensitivity Analyses..........................................................7

 Storage Tables...................................................................8

 Utility Macros...................................................................8

 Implicit Assumptions........................................................9

General Findings.................................................................10

Limitations..........................................................................11

Conclusions.........................................................................12

References...........................................................................12

Appendix 1—Selected Financial Terms Used in CVal .......14

Apendix 2—CVal’s Variables.............................................16

Appendix 3—CVal’s Macros..............................................20

Screenshots..........................................................................22
CVal: A Spreadsheet Tool to Evaluate 

the Direct Benefits and Costs of Carbon 

Sequestration Contracts for Managed 

Forests

E.M. (Ted) Bilek, Economist

Forest Products Laboratory, Madison, Wisconsin

Peter Becker, Research Coordinator 

Eastern Ozarks Forestry Council, Bunker, Missouri 

Tim McAbee, Consultant 

LandMark Systems, Tallahassee, Florida

Introduction

Regulated and Voluntary Markets for 

Sequestered Carbon

Sequestered carbon is becoming an increasingly important 

forest product in the marketplace. The long-run average 

price for sequestered greenhouse gasses that equate to 

a tonne of carbon dioxide is around $3.50 in the United 

States. Carbon markets are developing and can be broadly 

classified into regulated and voluntary.

In a recent study, Hamilton and others (2008) confirmed 

65.0 million tonnes of carbon dioxide equivalent (MtCO2e) 

transacted on voluntary U.S. markets in 2007. This was 

more than double the 24.6 MtCO2e that were transacted in 

2006 (Fig. 1). This amount is miniscule against the 2,983 

MtCO2e that were traded on regulated markets in 2007 

(Hamilton and others 2008), which is a better indicator of 

potential market size. In addition, this 2007 regulated market total was itself nearly 80% larger than that in 2006.

The Kyoto Protocol established the framework for a global 

regulated carbon market and has been signed by 183 countries. Although the United States has not ratified the Kyoto 

Protocol, several regional, regulated markets have been 

established. Examples include the California Climate Action 

Registry and, more recently, the Regional Greenhouse Gas 

Initiative. Voluntary carbon markets in the United States are 

prevalent. Ramseur (2007) provided an overview of voluntary carbon offsets. In reviewing literature on carbon offsets 

and the voluntary market, he found a correlation of offset 

prices and offset quality.

The voluntary carbon market can be further divided into 

two components: over-the-counter (OTC) and structured 

markets. The OTC market is highly fragmented and is based 

on a deal-by-deal basis. The structured Chicago Climate 

Exchange (CCX) provides a legally binding mechanism for 

carbon emission reductions once an entity becomes a member. The CCX is the only exchange platform in the United 

States for trading forestry offset credits (Ruddell and others 

2006).

The CCX is an exchange on which Exchange Forestry Offset (XFO) (also called carbon credits) are bought and sold. 

A carbon credit is normally quantified in terms of “carbon 

dioxide equivalent (CO2e).” CCX contracts are priced in 

terms of metric tonnes of carbon dioxide equivalent. One 

metric tonne (1,000 kilograms) is equal to 2,205 pounds or 

1.102 short tons. Carbon dioxide equivalent is the standard 

established by the Intergovernmental Panel on Climate 

Change (IPCC) to compare greenhouse gases (EPA 2005). 

Throughout this document and the spreadsheet CVal, 

“carbon” and “sequestered carbon” refer to CO2e.

CVal, a downloadable spreadsheet tool, was constructed for 

land owners and managers to evaluate the direct benefits 

and costs of entering into contracts for carbon sequestered 

in managed forests and forest plantations. It is best used by 

an aggregator, professional forester, or project developer 

with an understanding of realistic cost and benefit ranges 

and carbon sequestration rates. CVal was designed for XFO 

contracts on the CCX, although the methodology could be 

adapted for other project types or standards.

The tool was evaluated using representative data. Although 

the findings will not apply to all forest tracts, some 

0

10

20

30

40

50

60

70

2006 2007

MtCO2

e

Year

Chicago Climate Exchange

Voluntary OTC market

Figure 1—Volume of carbon transacted in voluntary U.S. 

markets, 2006 and 2007. OTC is over-the-counter.
General Technical Report FPL–GTR–180

2

generalizations may be made. Users are expected to enter 

their own data to represent individual projects.

Powerful and flexible, CVal automatically calculates the 

net benefit (cost) to a landowner of entering into a carbon 

sequestration contract from cash flows, which are both 

calculated and graphed. The net benefit (cost) is calculated 

in terms of discounted values. That is, the cash flows are 

adjusted by an interest rate for the year in which they occur. In addition, the internal rate of return (IRR) and modified internal rate of return (MIRR) are calculated. Benefits 

(costs) are calculated both at the beginning of the project, 

which is the year in which up-front costs are paid, and at the 

end of the project. Annualized benefits (costs) are shown. 

Financial break-even analysis of key input variables may be 

done either with macros or semi-automatically using Excel’s 

built-in tools. Built-in sensitivity analyses are performed on 

the hurdle rate, the specified counter year in which up-front 

costs occur, the initial carbon price, and percentage changes 

in annual, up-front, and end-of-program costs. Storage 

tables for variables make it easy to return to the original 

conditions after performing a “What-if?” analysis.

The Chicago Climate Exchange

Although membership in the Chicago Climate Exchange (CCX) is voluntary, once an entity joins, 

it contractually commits to annual greenhouse gas 

emission reductions of a specified magnitude compared with its original baseline emissions. Reductions 

beyond the contracted level can be sold to other CCX 

members who are in need of additional reductions. 

A portion of the offset carbon is project-based from 

landowners who have implemented carbon sequestering practices on their lands.

Individual landowners work through “aggregators” 

who bundle carbon credits into 100-tonne lots to be 

traded on the exchange. By enrolling land with an 

aggregator, the landowner gives the aggregator the 

rights to the sequestered carbon in exchange for payment. The aggregator chooses when to sell the credits 

on the CCX market, and within 24 hours of sale receives payment from the CCX. The aggregator makes 

payments to individual landowners at various times 

during the year. Payment allocation and disbursement 

systems vary among individual aggregators.

The CCX began its operations in 2003, completing 

a “phase 1” in 2006. “Phase 2” is scheduled to run 

through December 31, 2010, so contracts are legally 

binding only through that date and final payouts 

would be expected in 2011. If the CCX continues 

into a “phase 3,” landowners will have the option of 

being able to either renew their contracts or exit the 

exchange. CVal’s calculations can be extended to 

value sequestrations for up to seven years beyond the 

present.

In terms of total value, the transactions in the voluntary markets accounted for $331.8 million in 2007 (Hamilton and 

others 2008). This represented more than a trebling of the 

2006 value; but again, this total was minor compared with 

the $63.7 billion in total regulated market transactions.

Prices for sequestered carbon are quite volatile, although 

generally increasing (Fig. 2). A data series for the voluntary 

U.S. market going back to 2003 is available (Chicago Climate Exchange n.d.a). Daily closing prices for 2003 contracts have ranged from $0.73/tonne on May 7, 2004, 

to $7.40/tonne on May 30, 2008. Prices fell back to 

$1.10/tonne on November 17–20, 2008, before recovering 

somewhat. The most recent price on January 9, 2009, was 

$1.90/tonne. Still, a contract purchased for $0.98/tonne on 

the first available date of December 12, 2003, and held until 

January 9, 2009, would have returned a compound annual 

increase averaging 3.9% over the period. This compares 

with an annual compound loss of 3.6% if the same investment had been made in the S&P 500 index for the same 

period.

Available Tools

The markets for carbon sequestration are significant and 

growing. Tools are needed that can aid in the smooth and 

efficient operation of carbon markets. Any tool that can 

improve information, reduce transactions costs, and make 

transactions more transparent has the potential to improve 

market efficiency. Improved market efficiency should lead 

to more carbon sequestration contracts and increased 

benefits both for forest owners and potentially for the 

environment.

Smith and others (2005) presented techniques for calculating average annual net additions to carbon contained in 

forests and forest products. The tool they created provides 

average estimates of forest carbon and may be useful when 

more specific information is not available. Appendix A in 

Smith and others (2005) contains 51 tables broken down by 

forest type and region that contain estimates of timber volume and ecosystem carbon stocks for forest land after clearcut harvest. Forest ages range from 0 to 125 years. However, 

their report is limited to carbon sequestered and does not 

cover valuation methodologies.

The Chicago Climate Exchange (n.d.b) produced a set of 

regional estimates of annual carbon accumulation in live 

trees and soil organic carbon for afforestation projects. The 

Iowa Farm Bureau (n.d.) produced an application and sales 

contract for forestry carbon offsets that contains a carbon 

offset table based on Birdsey (1996). The Central Minnesota 

Regional Sustainable Development Partnership (CMRSDP, 

n.d.) produced a guide for landowners considering enrolling in the Chicago Climate Exchange. CMRSDP’s (n.d.) 

guide also contains an accumulation table for reforestation 

projects for various forest types that appears to be nearly 

identical to the Iowa Farm Bureau’s (n.d.) table and also has 

potential income calculations. However, these calculations 

do not include any costs apart from the CCX and aggregator 
3

charges. The CMRSDP example also does not include any 

allowances for variable sequestration rates or carbon prices. 

In addition, by simply adding income over the contract 

life, the CMRSDP implicitly assumes that the time value of 

money is 0%. Because initial enrollment costs will likely 

need to be financed, and 0% is not a realistic interest rate, a 

more sophisticated tool is needed to evaluate the potential 

profitability (or loss) of these contracts.

Commercial tools are also available. A web-based carbon 

valuation tool is available by subscription from Point Carbon (n.d.). From its description, this tool is focused on risk 

and portfolio management of Clean Development Mechanism and Joint Implementation credits under the Kyoto 

Protocol. Carbon valuation and reporting systems were 

developed by FORECON EcoMarket Solutions (n.d.) for the 

U.S. market. However, its solutions are customized and proprietary. The Carbon Finance Unit of The World Bank (n.d.) 

has a project financial analysis template that includes carbon 

benefits, but it is structured for large projects extending out 

28 years.

Capabilities of CVal

This paper describes a tool that can be used to quickly assess the direct benefits and costs to a forest landowner of 

entering into a carbon sequestration contract and demonstrates the tool’s power and versatility using a sample data 

set. Whereas general results from sample data are presented, 

users are expected to enter their own data to determine if 

entering into a sequestration contract is worthwhile.

The spreadsheet CVal was created to calculate a value for 

carbon sequestration contracts. The program was set up for 

contracts traded on the Chicago Climate Exchange, but the 

general methodology would be applicable for any carbon 

contracts. Although CCX contracts account for less than a 

quarter of the value of the voluntary transactions in 2007 

(Hamilton and others 2008), the structured contracts make it 

easier to construct a valuation model and work productively 

with potential owners of these contracts.

CVal calculates the value of the net benefit or cost of entering into a carbon sequestration contract. A Summary Financial Information table also displays the IRR and MIRR on 

the investment. The average carbon benefit, average cost of 

trading, and net trading benefit or costs are calculated on a 

per tonne basis. The per-acre net benefit or cost at the end of 

the project is also calculated. A chart shows the expected net 

cash flows per acre over the project life.

CVal should be of interest to foresters and other land management advisors advising owners about entering their 

forestlands into a carbon sequestration contract, especially 

under the CCX protocol. The tool should also be of interest 

to aggregators who accumulate carbon sequestration rights 

on land parcels so that the rights can be traded.

CVal Features

	Versions with either 1) built-in Visual Basic macros that 

automate extensive break-even financial calculations and 

utility functions or 2) without macros to ensure compatibility with all versions of Excel (Microsoft Corp., 

CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

12/12/2003

2/12/20044/12/20046/12/20048/12/2004

10/12/200412/12/2004

2/12/20054/12/20056/12/20058/12/2005

10/12/200512/12/2005

2/12/20064/12/20066/12/20068/12/2006

10/12/200612/12/2006

2/12/20074/12/20076/12/20078/12/2007

10/12/200712/12/2007

2/12/20084/12/20086/12/20088/12/2008

10/12/2008

Price index (12/12/2003 = 1000)

CCX carbon contracts

Standard & Poors 500

Day

Figure 2—Indices for Chicago Climate Exchange (CCX) daily closing prices for 2003 carbon contracts and the 

Standard & Poors 500, December 12, 2003, to October 27, 2008.
4

Redmond, Washington), virus-free downloading, operating, and sharing

	Automatic calculation of present value or cost, IRR, 

MIRR, and ending balance on a per-acre and per-project 

basis

	A cash flow table showing years in which both outflows 

and inflows are expected

	Built-in sensitivity analysis on carbon prices, hurdle rates, 

up-front costs, annual costs, and the year in which upfront costs occur

	Integration with Excel’s “Goal Seek” tool to perform 

break-even analysis

	Extensive graphics showing cash flows, rates of return, 

and sensitivity analyses

	Built-in warnings and error messages to facilitate errorfree calculations

	Extensive annotations in the form of cell comments to 

explain operations and minimize the need for reference 

to the user manual

CVal Location and Versions

Summary Financial Information

CVal is constructed with the output of greatest interest to the 

analyst or landowner, the Summary Financial Information, 

on top (Screenshot 1). (Screenshots start on page 22.)

Note the small red triangles in the upper right corner of 

some of the cells. These triangles indicate that the cell contains explanatory comments. To see the comments in the 

spreadsheet, scroll the cursor over a cell containing a comment. It will appear in a yellow box. Alternatively, go to the 

top menu and select View-Comments to see them all.

In Screenshot 1, the total net benefit (or cost) is the sum of 

benefits and costs discounted at the hurdle rate back to the 

contract year, which is the counter year in which the upfront costs occur. The formulation follows basic net present 

value methodology:

( )( ) ( ) ∑ ∑ ( ) = = − − + − + =

n

mt

n

mt

mt

t

mt

t B

r

C

r m1 1

netTotal benefit year in (cost)

where

Bt is the benefits from sales of the sequestration 

credits in year t,

Ct the costs of sales of the sequestration 

credits in year t,

r the discount rate represented by the hurdle 

rate, in decimal form,

t the counter year in which the benefits or 

costs occur,

m the contract year, which is the counter year in 

 which the up-front costs are paid, and

n the counter year of the final payout.

The reason for the terms “counter year” and “contract year” 

is that although CCX contracts can go back to the year 2003 

(counter year 1), the contracts are currently scheduled to end 

in 2010 with final payouts in 2011. If a contract was entered 

and up-front costs paid in 2008, counter year 6 would be the 

“contract year” and the valuation year for the net benefits or 

costs.

The reason that we have not just used absolute years is that 

the CCX program, currently in Phase 2, may be extended. 

Having both counter years and absolute years adds flexibility to CVal.

The IRR is a hurdle rate at which the total net benefit (or 

cost) in the contract year (year m) is $0:

( )( ) ( )( ) mt

t n

t

mt

t n

mt d

C

d

B

− = − = + − + == ∑ ∑ 1 1

If nettotal benefit(cost) $0

, 0

where d is the IRR, in decimal form.

To actually earn the IRR on the entire investment, any intermediate negative or positive cash flows would have to be 

either borrowed or reinvested at the calculated IRR. This 

may not be a reasonable assumption if the calculated IRR is 

very large or very small.

The MIRR is a calculation in which the net costs are discounted back to the contract year using the finance rate 

and then summed, and the net benefits are compounded 

out to the end of the project using the hurdle rate, and then 

summed. At that point, a simple rate of return formula is 

used to calculate the MIRR. 

MIRR 1

1

 − 

 



 = −mn

PV

FV

where

FV is the sum of the future value of the benefits compounded to the end of the project at the hurdle rate,

PV the sum of the present value of the costs discounted 

to the contract year at the finance rate,

m the counter year in which the up-front costs are 

paid,

n the counter year of the final payout, and

MIRR is calculated in decimal form.

Note that (n – m) is the number of years that the project 

runs. It is the number of years between the specified contract 

year (m) in which the initial up-front costs occur and the 

year of the final project payout (n).

Because reinvestment of intermediate cash flows is assumed 

to be at the hurdle rate rather than at the project’s IRR, 

MIRR may be more representative than IRR in a project 

with intermediate cash flows.

Below the Summary Financial Information table are the 

benefits and costs, both per acre and per tract (Screenshot 2). 

General Technical Report FPL–GTR–180

( )( ) ( ) ∑ ∑ ( ) = = − − + − + =

n

mt

n

mt

mt

t

mt

t B

r

C

m 1 r 1 yearin(cost)

netTotal benefit

( )( ) ( )( )mt

t n

t

mt

t n

mt d

C

d

B

− = − = + − + == ∑ ∑ 1 1

$0 benefit(cost)

If nettotal

0

MIRR 1

1

⎟ − ⎠

⎞ ⎜

⎝

⎛ = − mn

PV

FV
on capital as represented by the hurdle rate. The break-even 

analysis shows how low carbon prices, tract size, or carbon 

sequestration rates can go or how high up-front or end-ofprogram costs can be and still provide the minimum desired 

rate of return. The break-even analysis also shows by what 

percentage annual costs, up-front costs, and end-of-program 

costs could rise and still provide the minimum desired rate 

of return.

To calculate an accounting break even where costs are just 

covered by revenues, no matter when the costs or revenues 

occur, the hurdle rate should be changed to 0%.

At CVal’s financial break-even point, investors will 

earn exactly their desired rate of return on capital as 

represented by the hurdle rate. If the hurdle rate is 

specified as 0%, which is the accounting break-even 

point, CVal’s break-even calculations show input variable values at which investors will just recover their 

costs over time, but will earn no return on invested 

capital.

To test the break-even results, select a value from the breakeven table and paste the value into the appropriate cell in 

the Cash Flow Inputs (table 1 of CVal). At the break-even 

point, the total net benefit should be $0 and the IRR should 

be equal to the user-specified hurdle rate.

These break-even values are only calculated by specified 

actions. They must be re-calculated each time an input variable is changed. This can be done automatically using macros, semi-automatically using Excel’s built-in “Goal Seek” 

tool, or manually (not recommended).

The easiest way to find the break-even values is by running 

a macro. Macros to run a full break-even analysis and individual break-even analyses are pre-installed in the macros 

version of CVal along with buttons and active areas of the 

worksheet that simplify running these macros. The complete 

inactive macro scripts are included in a separate worksheet 

in the non-macros version of CVal along with instructions 

on how to copy and install them. For a description of all the 

break-even macros as well as the utility macros and how to 

use them, see Appendix 3.

In the macros version of CVal, note the “Run B‐E” button 

to the right of the Sensitivity Analysis table (Screenshot 3). 

Clicking this button automatically runs break-even analyses 

on all eight variables. Alternatively, macros calculating each 

of the eight variables can be run individually by clicking in 

the active area of each variable title in the break-even table. 

A full break-even analysis is also run when the “Store_Values” macro is run. Each of the macros can also be run by 

going to the main Excel menu and Tools-Macro-Macros-

[Select_Macro_Name]-Run.

The calculations for the tract are simply the per-acre calculations times the number of acres in the tract. The benefits 

and costs are shown valued in the year that the contracts 

begin and at the end of the contract. They are also shown on 

an annualized basis, which uses the basic capital recovery 

formula

( ) ( )

( ) ( ) 



















+ −

× + = ×

1 1

1

PV -

-

r

rr A mn

mn

where

PV is the total benefits (or costs) valued as of the year in 

which the initial up-front costs were incurred, and

A the annualized benefits (or costs).

All other variables are as defined previously.

Note in Screenshot 2 that the per-tract net benefit valued as 

of year 6 (i.e., $504, which is highlighted for this screenshot) is the same as the total net benefit from Screenshot 1. 

The benefits and costs valuations come from table 3, discussed below. The note in Screenshot 2 drawing attention 

to the identical annualized net benefits in year 6 and year 9 

($0.74/acre and $185/tract) is one of CVal’s conditional advisories that will appear only when the case is true.

To calculate the present value of the benefits and costs, 

standard discounting methodology is used. That is, benefits, 

costs, and tonnes of CO2e are discounted by using the formula

( ) ( )r t-m

t

+

=

1

FV PV

where

PV is the present value in counter year m of any 

single benefit or cost or tonne of carbon,

FVt the future value of the benefit or cost or tonne of 

carbon in any given counter year t,

r the annual discount rate in decimal form as 

 represented by the hurdle rate, and

m the counter year in which the up-front costs are 

 paid.

Break-Even Analysis

Beneath the benefits and costs table is one of CVal’s most 

powerful features—the break-even analysis (Screenshot 3).

CVal calculates variable values that will result in a financial 

break-even point. These break-even results are the maximum or minimum values for each variable that will provide 

the minimum required rate of return on investment (the 

hurdle rate), provided that the values of the other tabulated 

variables do not change. In other words, these results are 

the values at which the net benefit or cost (the net present 

value) is equal to $0, the financial break-even point. If these 

break-even results are used as input values for the variables, 

then investors should earn exactly their desired rate of return 

5

CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests

( ) ( )

( ) ( ) ⎥

⎥

⎥

⎦

⎤

⎢

⎢

⎢

⎣

⎡

−+

+× = ×

1 1

1

PV

r

rr A mn

–mn

–

( ) ( )r t – m

t

+

=

1

FV PV
6

Each of these individual break-even values can also be 

determined semi-automatically with Excel’s “Goal Seek” 

tool. First, to save the initial starting value for the variable 

from table 1, Cash Flow Inputs (Screenshot 4) select the 

cell containing the variable, copy it, and paste it somewhere 

for storage (e.g., in table 7, the storage table for temporary 

values used in break-even analysis). Then select cell G8 

(the net benefit or cost) and go to Tools-Goal Seek. Set G8 

equal to 0 by changing the cell from table 1 containing the 

variable of interest. After Goal Seek has found a solution, 

copy this value and paste it into the appropriate cell in the 

Break-Even Analysis table. To paste the value, go to Excel’s 

Edit-Paste Special-Values. Use this, rather than the general 

“Paste” command so that you do not change cell formatting. 

Then if you want to return the initial value, copy the initial 

starting value for the variable from wherever you stored it, 

and paste it back into table 1.

To find a break-even value manually, first store the initial 

starting value for the input variable from the Cash Flow 

Inputs as described in the previous paragraph. Then select 

the cell containing the variable that is of interest and manually change it until the total net benefit (or cost) in G8 is $0. 

Then copy the solution and paste it into the break-even table 

and restore the initial starting value as described in the paragraph above.

Cash Flow Inputs (table 1, table 2, and 

table 3)

All references to tables in this paper refer to those in 

CVal, but figure numbers refer to those in this paper.

The input variables in table 1, the Cash Flow Inputs

(Screenshot 4), are next to the Summary Financial Information. By placing these input values here, you may do 

a quick “what if” analysis. For example, “What is the effect on the net benefit or cost and the rates of return if the 

____________________ [fill in the blank] assumption 

changes?”). A complete list and description of CVal’s input 

values, along with their initial default assumptions is included in Appendix 2.

Note that three of these variables, “Sequestration rate is ...” 

“Carbon price is ...,” and “Count pre-contract carbon?” are 

entered via pull-down selections. Accurate analysis requires 

accurate specification of input values. Professional assistance may be required to specify the carbon sequestration 

rate and contract fee structure.

Beneath CVal’s summary values, break-even values, and 

inputs, on what would be page 2 of a print-out of the CVal 

worksheet, table 2 contains the Annual per Acre Inputs and 

Cash Flow Calculations. The only inputs that are required 

on this page are the annual carbon sequestration rates and 

annual carbon prices. Both these inputs are required only 

if the sequestration rate or carbon price are “Variable” in 

table 1. The first year’s sequestration rate and carbon price 

equal the rates set in table 1.

For the full and individual break-even analyses to work 

realistically, it is essential that both the sequestration rates 

and the carbon prices in subsequent years are entered as 

functions of the first-year values in table 2. Also, individual 

up-front costs must be entered as a function of total up-front 

costs in table 1.

For example, if carbon sequestration rates and carbon prices 

are both entered as “Constant” in table 1, then the formulas

= “Sequestration_rate” and 

= “Initial_carbon_price”

should be entered in the subsequent counter years for the 

annual sequestration rates and annual carbon prices, respectively. If the carbon sequestration rate or carbon prices have 

been set as “Constant” in table 1 but they are not constant in 

table 2, warning messages will appear and the sequestration 

rates or carbon prices that are different from the first year’s 

values will be highlighted. The macros version of CVal has 

Fix_Constant_Sequestration_Rates and Fix_Constant_Carbon_Prices, macros that will set formulas in all years equal 

to the initial year’s values. To run these macros, go to Excel’s Tools-Macro-Macros-[Select_Macro_Name]-Run.

Table 3, which contains the Per-Acre Present Value and 

Ending Balance calculations, follows the cash flow calculations. The per-acre total net benefit (cost) is the value reported in the Benefits and Costs table (Screenshot 2). Table 3 

contains more detail on how the total net benefits (costs) 

figure is calculated. It also contains a discounted value for 

the carbon, which is used in the calculation of the net trading benefit (or cost) per tonne. The ending balance portion 

of table 3 is shown (Screenshot 5).

The ending balance calculation shows how much cash 

would be in hand at the end of the project if the cash flows 

occurred as projected and if borrowings were at the finance 

rate and re-investments were at the hurdle rate. The ending balance each year is equal to the previous year’s ending 

balance, plus interest earned, less interest charged, plus 

the carbon benefit paid, less total costs. Positive beginning 

balances are carried forward and earn interest at the hurdle 

rate. Negative beginning balances are carried forward and 

charged interest at the finance rate. The formula to calculate 

the ending balance each year is

Ending balance = 

 [Beginning balance × (1 + r)] 

 + Carbon credit benefit paid – total costs

where beginning balance is the ending balance of the previous year and r is the interest rate in decimal form. 

If the beginning balance is negative, r is the finance rate of 

interest. If the beginning balance is positive, r is the hurdle 

rate.

General Technical Report FPL–GTR–180
Ending Balance Notes

	If the hurdle and the finance rates are both set 

equal to the IRR, the final ending balance will be 

$0.00.

	If the hurdle and finance rates are identical, the 

final ending balance may be found using the 

formula

Final ending balance = total net benefit 

(cost) × (1 + r)(n – m)

where total net benefit (cost) is from the initial 

net benefit (cost) calculation, and

r is the hurdle rate in decimal form,

n the counter year of the final payment, 

 and

m the contract year, which is the counter 

year of the up-front costs.

For example, $2.33 = $2.02 × (1.05)(9 – 6)

	A break-even analysis run on the final ending 

balance and the finance rate will return the IRR. 

That is, if the finance rate is equal to the IRR, the 

final ending balance equals $0.

The net trading benefit or cost on a dollar per tonne basis 

is shown below table 3. The net trading benefit or cost is 

shown in terms of dollars at the contract year. All benefits 

and costs as well as tonnes of carbon are discounted back 

to the beginning of the project to get average figures in dollars per tonne. Discounting is necessary to get a meaningful 

calculation if the benefits, costs, or amount of carbon traded 

each year are anything but constant, or if the hurdle rate is 

anything other than 0%. A tonne of carbon sequestered today is not the same as a tonne of carbon sequestered several 

years from now because that tonne of carbon today could be 

sold and the proceeds invested at some interest rate. Therefore, both dollars and tonnes of carbon need to be discounted to get meaningful averages over the life of the project.

The net cash flow per acre graph (Fig. 3) is next to the net 

trading benefit or cost calculation. This graph shows the net 

cash flow data coming from table 2. 

Sensitivity Analyses

Following on what would be pages 3 and 4 of a printout 

are four sensitivity analyses. In addition to the break-even 

sensitivity analysis, CVal automatically conducts a full sensitivity analysis on four key variables: the hurdle rate, the 

year in which up-front costs occur, the initial carbon price, 

and costs.

7

Table 4 shows the sensitivity of the net benefit (cost) to the 

hurdle rate. To the right of table 4, its results are shown 

graphically (Fig. 4). Table 4 has three user-entered variables: the mid-point for the hurdle rate graph, the hurdle rate 

increment, and an IRR test number.

The hurdle rate mid-point and the hurdle rate increment 

both control the x-axis. To see where the net present value 

crosses $0, which by definition is the IRR (Fig. 4), adjust 

the mid-point hurdle rate and the hurdle rate increment until 

the column with the total net benefit (cost) has both positive 

and negative values.

The “IRR test number” (cell C94) is a user-entered variable 

that is used as a starting point for Excel’s IRR calculation. 

This variable is also used in the IRR calculation in the Summary Financial Information table. If the IRR calculation 

returns the #NUM! error, but you can see from the graph 

(Fig. 4) that the net benefit (cost) curve will cross $0 with 

some adjustments of the hurdle rate’s starting point and 

increment, then adjusting the “IRR test number” to the approximate hurdle rate where the Net benefit (cost) = $0 

should avoid the #NUM! error message. Some adjustment 

may also be needed to the mid-point of the graph (cell B81) 

and the increment (cell C92).

Table 5 displays the sensitivity of net benefit (cost), IRR, 

MIRR, and ending balance to the year that up-front costs occur. Maximum values and the year in which they occur are 

also provided (Screenshot 6).

To the right of the sensitivity analysis table appears a graph 

showing the sensitivity of the ending balance and the IRR to 

the year in which up-front costs occur (Fig. 5).

CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests

(10.00)

(5.00)

 0

5.00

10.00

1 2 3 4 5 6 7 8 9

Net cash ($/acre)

Counter year

Figure 3—CVal’s net cash flow per acre graph.

(1,000)

(500)

0

500

1,000

04

8

12

1620242832

36

40

Hurdle rate (%)

IRR = 16.6%

Total net benefit (cost $)

Figure 4—CVal’s graph showing the sensitivity of the 

total net benefit (or cost) to the hurdle rate.
8

The sensitivity to the initial carbon price of the net benefits 

(or costs), the IRR, MIRR, and ending balance are found in 

table 6, (Screenshot 7).

It is important to note that the results in table 6 will be 

meaningful only if the variables representing carbon prices 

in the Input table 2 are set as a function of the Initial_carbon_price, which is in Year 2. For example, if carbon prices 

are set as “Constant” in the Input table 1, the formula, 

“= Initial_carbon_price” can be entered for the carbon prices 

(green field) in the Input table 2 for Years 3 to 9. If carbon 

prices are set as “Variable” in the Input table 1, the prices in 

Years 3 to 9 in Input table 2 must be set as a function of the 

initial price (e.g., if prices are expected to increase by 5% 

per year, the price in Year 3 is made equal to 1.05 × Year 2 

price).

Table 6 also has two user-entered variables that control the 

x-axis in the accompanying graph (Fig. 6). These variables 

are the mid-point for the initial carbon price and the initial 

carbon price increment. 

Note that if any of the IRR calculations in table 6 shows a 

#NUM! error message, it will be because at the specified 

initial carbon price either all of the cash flows are negative 

or the calculations are outside of Excel’s IRR calculation 

algorithm. To check the reason for the error, first substitute 

the offending initial carbon price from table 6 into the initial 

carbon price in table 1 (cell J11). Then check the net cash 

flows in table 2 (cells O31:O39). If all the cash flows are 

either $0 or negative, then you have discovered the problem. 

If at least one of the cash flows is positive, then there may 

be an interest rate that will make the net benefits (costs) 

equal to $0. To find this rate, experiment with the IRR test 

number (cell C94). After you have found the rate that will 

allow Excel to calculate an IRR, restore the original initial 

carbon price back into table 1 (cell J11).

CVal’s costs are divided into annual costs, up-front costs, 

and end-of-project costs. The sensitivity of the net benefits 

(or costs) to changes in costs in each of these groupings is 

found in table 7 (Screenshot 8). This table also has two userentered variables to control a central point in the graph and 

to control the increment change in costs. The central point 

will probably be 0%. At this point, the costs are calculated 

as entered in table 1 and the net benefits (costs) are the same 

as reported in the Summary Financial Information table.

A graph of the information in table 7 helps to see which of 

the cost groupings will have the most significant effect on 

net benefits (costs) (Fig. 7). The most important cost grouping will have the steepest line.

Storage Tables

CVal’s final two tables are storage tables. Table 8 is a storage table for temporary values used in CVal’s break-even 

analysis macros. CVal’s break-even macros access this table 

automatically. It can also be used to manually store starting values so that they may be easily restored following a 

break-even analysis calculation. Table 9 is used to store and 

restore user-entered starting values and formulas in table 1, 

table 2, the Break-Even Analysis table, and in the Sensitivity 

Analysis tables (table 4, table 6, and table 7) so that a user 

can easily try different variables in a “What if?” analysis 

and then return to the initial conditions.

Utility Macros

CVal’s macros version has two buttons at the top of the 

worksheet: “Store values” and “Restore values.” “Store 

values” runs the “Store_Starting_Values” macro, which first 

General Technical Report FPL–GTR–180

(2,000)

0

2,000

4,000

6,000

8,000

1 2 3 4 5 6 7 8

Contract year

Ending balance ($ per tract)

– 60

– 40

– 20

0

20

40

60 Ending balance ($)

Internal rate of return (%)

Internal rate of 

return (%) 

Figure 5—CVal’s graph showing the sensitivity of the 

ending balance and internal rate of return to the year 

in which the up-front costs occur with no payment 

given for pre-contract year carbon credits.

(4,000)

(2,000)

0

2,000

4,000

6,000

8,000

– 100

– 50

0

50

100

150

Internal rate of  return (%) 

Net benefits (costs) ($)

Internal rate of return (%)

Net benefit (cost $)

Initial carbon price ($/tonne CO2e)

 2.00  3.00 4.00 5.00 6.00 7.00  8.00 9.00 

 10.00 

1.00 

Figure 6—CVal’s graph showing the sensitivity of the 

total net benefits (or costs) and internal rate of return 

to the initial carbon price.

(600)

(400)

(200)

0

200

400

600

800

1,000

1,200

– 25

– 20– 15– 10– 5

0 5

1015

20253035404550

Sensitivity to up-front cost changes

Sensitivity to annual cost changes

Sensitivity to end-of-project cost changes

55

Net benefits (costs)

Costs sensitivity factor

Figure 7—CVal’s graph showing the sensitivity of the 

total net benefits (or costs) to up-front and annual cost 

changes.
9

runs a break-even analysis and then copies the initial values 

and formulas from table 1, table 2, the Break-Even Analysis

table, and the user-entered values from table 4, table 6, and 

table 7 in the sensitivity analysis. The macro then transfers 

these starting values and formulas into table 9 for storage. 

The “Store_Starting_Values” macro runs a full break-even 

analysis before copying and storing any values so that when 

the starting values are restored, the values in the break-even 

analysis table will be correct.

A user may then manually make any modifications to the 

input variables in table 1 and table 2 doing a “What if?” 

analysis, and perform any break-even or sensitivity analyses 

and still easily get back to the initial data set by clicking 

the “Restore values” button, which runs the “Restore_Starting_Values” macro. The “Restore_Starting_Values” macro 

copies the macro (or user)-entered values and formulas from 

table 9 and pastes them into the appropriate cells in table 1, 

table 2, the Break-even Analysis table, and the sensitivity 

analysis tables.

CVal’s macros version has three additional utility macros. 

Note the similarity between the first two, Fix_Constant_Carbon_Prices and Fix_Constant_Carbon_Sequestration_Rates:

	Fix_Constant_Carbon_Prices: If the annual carbon 

sequestration price is “Constant” (specified in Input 

table 1), Excel will not automatically fill in the cells in 

input table 2, unless there is a formula in counter year 3 

through counter year 9.

To ensure constant-price formulas you can run the utility 

macro or fix the rate manually. To use the utility macro, 

go to Tools-Macro-Macros-Fix_Constant_Carbon_PricesRun. This will fill in formulas in counter years 3 through 

9, setting the cells equal to the initial carbon price.

To manually fix a constant carbon price in each of the 

cells in each of the carbon price cells in table 2 for counter year 3 through counter year 9 enter the formula

= “Initial_carbon_price”

This will set the annual carbon prices equal to the initial 

carbon price entered into table 1.

	Fix_Constant_Carbon_Sequestration_Rate: If the annual sequestration rate is “Constant” (specified in input 

table 1), Excel will not automatically fill in the cells in 

input table 2, unless there is a formula in counter year 2 

through counter year 8.

To ensure constant sequestration rates, you can run the 

utility macro or fix the rate manually. To use the utility 

macro, go to Tools-Macro-Macros-Fix_Constant_Carbon_Sequestration_Rates-Run. This will fill in formulas 

in counter years 2 through 8 setting the cells equal to the 

initial sequestration rate.

To manually fix a constant sequestration rate in each of 

the sequestration rate cells in table 2, for counter year 2 

through counter year 8 enter the formula

= “Sequestration_rate”

This will set the annual sequestration rates equal to the 

initial sequestration rate entered into table 1.

	Restore_Default_Values: this macro returns the initial 

demonstration values that came with CVal. In the version 

of CVal with macros, the easiest way to run this macro is 

to click in the active area of cell J8. Alternatively, go to 

Tools-Macro-Macros-Restore_Default_Values-Run

The Restore_Default_Values macro can be “worked 

around” in the version of CVal without macros by using 

Excel’s Scenarios tool and showing both the Default_

cash_flow_inputs and the Default_sequestration_and_

price scenarios (Tools-Scenarios-[Scenario_name]-Show). 

This will restore the default values for the variables. 

The problem with the Scenarios tool (in CVal without 

macros) is that the tool does not restore the initial formulas in the variable cells. It replaces the formulas with absolute values. For example, in table 1 the formulas making the initial up-front costs a function of total up-front 

costs are replaced with numbers. Similarly in table 2, the 

formulas for the constant sequestration and carbon prices 

are replaced with numbers. This creates misleading and 

erroneous answers if the “Goal Seek” tool is subsequently used to run a break-even analysis because only costs 

that are related to the changing variable by function will 

be changed in the break-even analysis. See the sections 

under the Fix_Constant_Carbon_Prices and Fix_Constant_Carbon_Sequestration_Rate macros on how to manually fix the constant formulas if they have been replaced 

with numbers.

Implicit Assumptions

CVal’s main input assumptions were described above and 

shown in table 1 (Screenshot 4) and table 2.

There are a number of implicit assumptions within CVal’s 

calculations:

	Benefits and costs all occur at the end of each year. This 

standard assumption in most discounted cash-flow methodology makes calculations much more convenient and 

has minimal effect on the summary financial information.

	Carbon is not traded until the year after it is sequestered, 

as required under CCX rules.

	All carbon that is sequestered is traded in the subsequent 

year. This provides the maximum return for discounted 

cash flow purposes, assuming constant carbon price.

	The carbon reserve is traded in the year following the end 

of the contract. This assumes that no catastrophic event, 

CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests
10

such as a forest fire or blow down, uses these credits from 

the carbon reserve.

	Any revenues or fees associated directly with a carbon 

trade are applied when the trade is made, not when the 

carbon is sequestered.

	Findings are all pre-tax and on a real basis, which does 

not include inflation.

General Findings

The sample data set that we ran is not representative of 

any specific forested tract or of identified market costs or 

benefits. Still, we believe that the data do represent realistic 

enough numbers so that we can present generalized results 

that are worth considering when running an analysis with 

data for an individual landowner.

Given the input assumptions we chose, the investment in 

a carbon sequestration contract appears to be a reasonable 

one. The total net benefit discounted at 5.0% and valued in 

year 6 is $504. This net benefit is in addition to the required 

5.0% rate of return. The investment produces an IRR of 

16.6% and a modified IRR of 13.2% when using constant 

prices of $3.50/tonne CO2e, a constant sequestration rate 

of 1.50 MT/acre/year, and finance and reinvestment rates 

of 5.0%. The net trading benefit is $0.47/tonne CO2e and 

the final ending balance at the close of the project in 2011 

promises to be $2.33/acre.

The net cash flows were shown (Fig. 3). The default assumption is that the landowner enters into a sequestration 

contract in year 6 (2008) and that the program finishes out 

in year 9 (2011). The cash flows are initially negative, as 

fixed up-front costs required to enter the program are paid. 

These average $8/acre for the 250-acre tract. If vintage credits were allowed, there would be a large benefit in 

year 7, when the owners would receive the credit for carbon that was sequestered prior to program entry back to 

counter year 1. Our default assumption is that such credits 

will not be allowed for the project, although CVal allows 

this assumption to be negated. The ending balance remains 

negative until year 9, the year in which the benefits for the 

carbon reserve are received.

A break-even analysis run on eight key variables (Screenshot 3) shows that the initial carbon price could drop by 

about 23% (from $3.50/tonne CO2e down to $2.95/tonne 

CO2e) and the project would still break even (earn the specified hurdle rate). Similarly, the smallest tract size that could 

be enrolled in the scheme with these assumed input benefits 

and costs is 204 acres. Sequestration rates, estimated at 

1.50 tonne CO2e/acre/year, could be as low as 1.22 tonne 

CO2e/acre/year. The maximum up-front total cost that 

this project could possibly support is $2,504/tract and the 

maximum end-of-project costs would be $806/tract. Annual 

costs could increase as much as 62%, up-front costs could 

increase as much as 25%, or end-of-project costs could 

increase as much as 222%, and the project would still break 

even. It is important to note that if any one of these variables 

changed to these break-even levels and if there were adverse 

changes in any of the other variables, the project would not 

return its desired rate of return as represented by the hurdle 

rate.

The higher the hurdle rate, the higher the MIRR becomes. 

For example, doubling the hurdle rate from 5% to 10% increases the MIRR from 13.2% to 14.6%. This is a logical 

result. The MIRR calculation assumes that positive cash 

flows are re-invested at the hurdle rate and as funds are reinvested at higher assumed rates, their compounded future 

value becomes larger, which increases the MIRR.

A counter-intuitive result in this example is that the MIRR 

is unchanged by the finance rate. This is because annual net 

cash flows are positive, apart from the initial up-front costs. 

The result is that the discounted value of the only cash outflow, which occurs at the beginning of the project, is unaffected by the finance rate used.

In contrast to the MIRR, the final ending balance, which is 

the net benefit (or cost) valued in year 9 (shown in Screenshot 2) is inversely affected by the finance rate used. As 

the finance rate increases, the ending balance declines. The 

ending balance is equal to $0 when the finance rate reaches 

16.6%, which is the IRR. To test this result, go the CVal 

worksheet and copy the IRR (cell G9). Select the cell containing the finance rate (M15) and go to Edit-Paste SpecialValues. The exact IRR should now be pasted into the finance 

rate. Now scroll down to the cell containing the calculation 

of the final ending balance (cell L54). It should be $0.

The year in which up-front costs occur is an important variable affecting the project’s overall return. Its effect is linked 

to whether pre-contract year sequestered carbon can be 

counted and traded in the year after the up-front costs occur 

(the year after entering the sequestration program). Whether 

or not pre-contract year sequestered carbon can be counted 

is controlled with a “Yes-No” variable in table 1.

If pre-contract sequestered carbon cannot be counted, then it 

is beneficial to both the ending balance and the IRR to enroll 

in the program as soon as possible. The contract year is one 

of the most critical variables affecting the financial returns. 

Both the IRR and the ending balance decrease the longer 

enrollment is delayed. This was shown (Screenshot 6 and 

Fig. 5). Note in this screenshot and figure that counter year 

6 is the last year in which enrollment can occur and still provide a positive total net benefit and ending balance. If enrolment occurs after year 6, the ending balance turns negative 

and the IRR is less than the specified 5.0% hurdle rate.

Under the other initial conditions, including enrollment in 

year 6, if pre-contract sequestered CO2e could be counted, 

the net benefit would jump to $5,236 for the tract and the 

final ending balance would become $6,061. The IRR would 

be 170.0%, with a MIRR of 61.2%. In addition, the 

General Technical Report FPL–GTR–180
minimum initial carbon price would drop to $1.40/tonne 

CO2e and the minimum tract size would drop to just 75 

acres. In other words, if pre-contract sequestered carbon is 

available for trading, the financial benefits are vastly improved.

...if pre-contract sequestered carbon is not available 

for trading, it will be financially beneficial to enroll 

in a sequestration scheme sooner rather than later. 

An extension of the program will have an immediate 

positive effect on the financial feasibility of a sequestration project. 

Alternatively, if the CCX program is extended, the financial 

benefits are improved. If the CCX program is extended two 

years through to 2012 and the up-front costs still occur in 

2008 (now counter year 4), the net benefit becomes $2,095, 

the ending balance $2,673, the IRR 33.7% and the MIRR 

21.2%. The sensitivity analysis shows that the minimum 

carbon price becomes $2.04/tonne CO2e and the minimum 

tract size drops to 128 acres. With five years to accrue 

benefits, the minimum annual sequestration rate drops to 

0.77 tonnes CO2e/acre.

It is often the case when using discounted cash-flow analysis 

that financial feasibility is closely linked to both the discount rate and to product prices. This project is unexceptional in this respect. The relationship between total net benefits 

(or costs) and the discount rate was shown above (Fig. 4). 

As the discount rate (= hurdle rate) increases, the project’s 

total net benefit decreases. At a hurdle rate of 16.4%, which 

is the project’s IRR, the net benefits are $0 (see also, Screenshot 1). With hurdle rates above this point, the discounted 

costs are larger than the discounted benefits.

The total net benefits (or costs) and the IRR also appear to 

be closely linked with the initial carbon price. Both dependent variables are closely correlated with each other. These 

relationships were shown in Figure 6.

Both the net benefits and the IRR rise and fall rapidly with 

changes in carbon price. The net benefits turn negative at the 

break-even carbon price of $2.95/tonne (Screenshot 3).

The maximum total up-front cost is $2,504. That is, if total 

up-front costs are larger than this amount, the project will 

not return its required rate of return on investment. It is 

worthwhile noting that this $2,504 in maximum up-front 

costs (Screenshot 3) is exactly $504 more than the $2,000 

in total initial up-front costs in the default base case. That 

difference, $504, is also exactly the total net benefit from 

(Screenshot 1). In other words, the total net benefit shown in 

the Summary Financial Information (Screenshot 1) also represents the maximum amount that total up-front costs could 

possibly increase with the project still providing at least the 

required rate of return as represented by the hurdle rate.

11

The net benefits (costs) are more sensitive to up-front costs 

than to annual costs and end-of-project costs (Screenshot8 

and Figure 7). This is indicated by the fact that net benefits 

(costs) both rise and fall more quickly with the same percentage changes in up-front costs compared with annual 

costs and end-of-project costs. It is also indicated in the 

break-even analysis (Screenshot 3), which gives cost sensitivity factors of 25% for up-front costs but 62% for annual 

costs and 222% for end-of-project costs. This smaller percentage for up-front costs indicates a smaller buffer in cost 

rises before break-even occurs.

Other break-even analyses indicate that the minimum tract 

size required is 204 acres and the minimum year 1 carbon 

sequestration rate is 1.22 tonnes CO2e/acre/year (Screenshot 3). This means that if the number of acres was less than 

204, the initial up-front costs would be too large for the 

project to break even. Similarly if the annual carbon sequestration rate was less than 1.22 tonnes CO2e/acre/year, the 

project would not return its required rate of return on investment as represented by the hurdle rate.

Limitations

CVal provides no guarantee that a carbon sequestration 

contract will be profitable. The program requires a user to 

enter some forward-looking estimates of prices, costs, sequestration rates, and interest rates. CVal’s results will only 

be as good as are the forecasted benefits and costs.

CVal’s analysis covers only the carbon sequestration component of forest management. The results apply only to that 

component. That is, CVal is a tool for doing an incremental 

or marginal analysis. CVal does not incorporate the full silvicultural costs and harvest revenues or opportunity costs 

for possible revenues foregone as a result of entering into 

a carbon sequestration contract. However, CVal’s results 

could be included with those of other forest management 

tools to produce numbers for a full comparative analysis.

CVal is not set up to do options analysis. An aggregator 

might ask, “Given carbon prices today and their variability, 

am I better off trading today or should I hold off trading 

until possibly next month or next year?” While CVal can 

be used to analyze the effect of changing prices on overall 

returns and can quickly provide the answer to what returns 

and cash flows would look like if prices did change to a specific level, the program is not designed to provide the value 

of the option to trade later, given a price variability range.

Apart from possibly delaying entry into the CCX program, 

which delays the initial cost and payment, and the carbon 

reserve, which has an effect on the final payment, an inbuilt 

assumption in CVal is that the sequestered carbon will be 

traded annually. There is not an option within CVal to delay trading and accumulate annually sequestered carbon 

for a future year. However, this limitation could be worked 

around by having the sequestration rate be “variable” (cell 

CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests
12

J9), manually entering a 0 for the annual carbon sequestration in one or more years (cells C32:C38) in which carbon 

would be sequestered but not traded, and then manually 

adding the carbon that was not traded to the amount sequestered in the next year in which a trade is planned to occur.

CVal is only set up to allow complete calculations through 

Phase 2 of the CCX, which finishes in 2010. If the program 

is renewed and extended into a Phase 3 then the current version of CVal would have to be modified slightly. The CCX 

end-of-program year (cell M17) would have to be changed 

and the year that up-front costs occur (cell M11) would 

have to be adjusted. If pre-contract carbon was allowed to 

be counted, then the sequestration rate would have to be 

“variable” and the year 1 sequestration rate would have to 

include all the prior years’ carbon going back to 2003. After 

making these changes, the Break-Even Sensitivity Analysis

table would have to be re-constructed. These adjustments 

would work as long as the CCX program was not extended 

more than seven years beyond the current calendar year. If 

the program was extended for more than seven years, then 

the structure of the CVal program itself would have to be 

modified.

Conclusions

The results of this study show that many variables affect 

the financial attractiveness to a landowner of entering into a 

carbon sequestration contract. The year that up-front costs 

occur is probably the most critical variable affecting overall 

financial returns. Carbon prices, carbon sequestration rates, 

and the hurdle rate are also important variables determining overall profitability. Up-front costs are probably going 

to have a larger effect on overall profitability than on-going 

verification, re-certification, and trading fees.

CVal is a tool that can be used to quickly analyze variables 

that affect the benefits and costs of a carbon sequestration 

project and determine their effect on the project’s returns. 

The tool can be used to show under what conditions a contract is worthwhile to a landowner, and answer “What if?” 

questions if those conditions change. Break-even analysis 

shows how much key variables can change while still having the project return at least its minimum desired rate of 

return.

Finally, just because a carbon sequestration contract may 

appear financially favorable or unfavorable for a landowner 

does not mean that it “should” or “should not” be entered 

into. There may be non-market factors coming into the 

analysis that have an effect on the decision.

References

Birdsey, Richard A. 1996. Carbon storage for major forest types and regions in the coterminous United States. In: 

Sampson, N.; Hair, D., eds. Forests and global change. 

Volume 2: forest management opportunities for mitigating carbon emissions. Washington, D.C: American Forests: 

1–25, Appendixes 2–4.

Central Minnesota Regional Sustainable Development Partnership (CMRSDP). n.d. A landowner’s guide to carbon 

sequestration credits. Community-university partnership 

supported by: Central Minnesota Regional Sustainable Development Partnership. 19 p. Website: http://www.cinram.

umn.edu/publications/landowners_guide1.5-1.pdf. Accessed 

August 20, 2008.

Chicago Climate Exchange. n.d.a. CCX Confidential. Section 2c: Regional estimates of tree annual carbon accumulation in live trees and soil organic carbon for afforestation 

(Metric tons CO2/acre/year age of tree). http://carboncredit.

ndfu.org/pdfs/Forestry/ForestryTables.pdf. Accessed August 

20, 2008. 

Chicago Climate Exchange. n.d.b. www.chicagoclimatex.

com/index.jsf. Accessed August 12, 2008.

Environmental Protection Agency. 2005. Emission facts. 

Metrics for expressing greenhouse gas emissions: carbon 

equivalents and carbon dioxide equivalents. Office of Transportation and Air Quality. EPA420-F-05-002. 3 p.www.epa.

gov/otaq/climate/420f05002.pdf. Accessed September 15, 

2008.

FORECON EcoMarket Solutions, LLC. n.d. http://www.

foreconinc.com/EcoMarket. Accessed August 20, 2008.

Hamilton, Katherine, Milo Sjardin, Thomas Marcello, and 

Gordon Xu. 2008. Forging a frontier: state of the voluntary 

carbon market, 2008. 78 p. www.ecosystemmarketplace.

com/documents/cms_documents/2008_StateofVoluntaryCarbonMarket2.pdf. Accessed August 20, 2008.

Iowa Farm Bureau. n.d. Application for participation in 

forestry offset pool and sales contract for exchange forestry 

offsets (xfos). www.iowafarmbureau.com/special/carbon/

pdf/XFO%20Sales%20Contract%202006-2010.doc. Accessed August 20, 2008.

Point Carbon. n.d. Carbon Valuation Tool. www.pointcarbon.com/trading/cvt/. Accessed August 21, 2008.

Ramseur, Jonathan L. 2007. Voluntary carbon offsets: overview and assessment. CRS Report for Congress. RL34241. 

Congressional Research Service. 12 p. http://sharp.sefora.

org/wp-content/uploads/2007/12/carbon-offsets.pdf. Accessed August 29, 2008.

Ruddell, Steven; Walsh, Michael J.; Kanakasabai, Murali. 

2006. Forest carbon trading and marketing in the United 

States. A paper commissioned by the North Carolina Division of the Society of American Foresters (SAF) and funded 

through the SAF’s Foresters’Fund. www.fs.fed.us/ecosystemservices/pdf/forest-carbon-trading.pdf. Accessed September 16, 2008.

General Technical Report FPL–GTR–180
13

Smith, James E., Linda S. Heath, Kenneth E. Skog, and 

Richard A. Birdsey. 2006. Methods for calculating forest 

ecosystem and harvested carbon with standard estimates for 

forest types of the United States. U.S. Forest Service, Northeastern Research Station. General Technical Report NE–

343. Website: http://www.treesearch.fs.fed.us/pubs/22954. 

Accessed August 20, 2008.

World Bank. The World Bank Carbon Finance Web Site. 

n.d. www.carbonfinance.org. Accessed September 16, 2008.

CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests
14

General Technical Report FPL–GTR–180

Appendix 1—Selected Financial 

Terms Used in CVal

Annual costs are costs that occur each year, including the 

aggregator’s fee, verification costs, and annual re-certification costs.

IMPORTANT! The annual costs in CVal should not include inflation.

Annualized benefits (costs) are the net benefits (costs) annualized over the number of years from the contract year to 

the end of the program using the hurdle rate and an annuity 

formula. This spreads the net benefits (costs) over the number of years the project is in place.

Benefits and costs are measured in CVal in terms of cash 

flows.

Benefits are equal to the price of CO2e each year ($/tonne) 

times the amount of CO2e traded in each year (tonnes). CVal 

has an in-built assumption that the cash benefits are received 

in the year after the carbon is sequestered.

Costs are equal to up-front costs (in the contract year only), 

plus annual costs, plus end-of-project costs (in the final year 

only)

See also: annualized benefits (costs)

 net benefits (costs)

IMPORTANT! The benefits and costs in CVal should not

include inflation.

Break-even analysis is an analysis in which a specified input variable is changed until the financial break-even point

is reached.

Cash flow is the sum each year of the benefits less the costs 

in that year. When each cash flow is discounted using the 

hurdle rate and then summed, the result is the net benefit 

(cost).

Contract year is the year in which the up-front costs are 

paid. This is the start of the project.

Ending balance is a measure of project profitability. The 

ending balance each year is equal to the beginning balance 

plus interest earned at the hurdle rate on positive beginning balances (or less interest charged at the finance rate on 

negative beginning balances) plus the carbon credit benefit 

paid, less total costs.

See also: final ending balance

End-of-project costs are costs (if any) required in the final 

year of the project. In CVal, the end-of-project costs includes the ending inventory cost.

IMPORTANT! The end-of-project costs in CVal should 

not include inflation.

Final ending balance is a measure of project profitability. 

Final ending balance is the net benefit (cost) that would 

be expected at the end of the project if the cash flows and 

reinvestments occurred as predicted. If the final ending balance is positive, the project will be expected to earn a rate 

of return greater than its hurdle rate. If the final ending balance is negative, the project will be expected to earn a rate 

of return less than its hurdle rate. If the final ending balance 

is $0, the project will be expected to earn exactly its hurdle 

rate.

See also: ending balance

Finance rate is used in the calculation of the modified internal rate of return MIRR and the ending balance. Finance 

rate is the cost of borrowed money invested in the project.

IMPORTANT! The finance rate in CVal should not include 

inflation.

Financial break-even is a break-even point at which the net 

benefits (costs) valued in the contract year are exactly $0. 

Note that at the financial break-even point, a project’s rate of 

return will be exactly equal to its hurdle rate.

Hurdle rate is the interest rate that investors require for the 

investment to be worth the risk. It may represent the cost of 

equity capital or the return expected on the next best alternative investment with similar risk.

The hurdle rate is used to calculate total net benefit (cost). 

The hurdle rate is also used as the reinvestment rate in calculation of the MIRR and as the reinvestment rate for positive balances in calculation of a project’s ending balance

and final ending balance.

IMPORTANT! The hurdle rate in CVal should not include 

inflation.

Internal rate of return (IRR) is an interest rate that, if 

used to discount the net cash flows (benefits minus costs), 

will cause their sum to be $0. If the IRR is used as both the 

hurdle rate and the finance rate, the final ending balance 

will also be $0.

If IRR is used as a measure of an investment’s return, its 

calculation implicitly assumes that any intermediate cash 

flows will be borrowed or re-invested at the calculated IRR.

Modified internal rate of return (MIRR) is a measure of 

return on investment. MIRR’s calculation assumes that any 

negative intermediate cash flows will be borrowed at the 

assumed finance rate and any positive cash flows will be 

re-invested at the assumed hurdle rate.

Net benefit (cost) is a measure of project profitability. Benefits and costs are both adjusted by the hurdle rate and the 

year in which they occur. Net benefits (costs) at the start of 

the project are equal to its net present value. Net benefits 

(costs) at the end of the project are equal to its final ending 

balance.
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CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests

Sensitivity analysis factor can be used to increase or decrease a specified input variable by an entered percentage.

Up-front costs are the initial costs required to enter into a 

sequestration program to allow sequestration credits to be 

sold. In CVal, up-front costs consist of initial inventory cost, 

management plan cost, certification cost, and other up-front 

costs. It is assumed in CVal that these up-front costs occur 

in the contract year, which is in the year before any carbon 

trading can occur.
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General Technical Report FPL–GTR–180

Appendix 2—CVal’s Variables

Most of CVal’s variables are entered in table 1: Cash Flow 

Inputs. Depending on the options selected, annual sequestration rates and annual carbon prices may need to be entered 

in table 2: Per Acre Inputs and Present Value Calculations. 

Other variables not included in either of these tables include 

the tract name, which is entered at the top of the spreadsheet, and starting points and incremental changes for the 

sensitivity analyses, which are entered in the sensitivity 

analysis tables. The main input variables follow in their order of appearance in the tables on the CVal worksheet.

Tract size: Up-front costs tend to be fixed, regardless of the 

tract size. For that reason, the relationship between the tract 

size and the net benefit or cost is not strictly linear.

Default: 250 acres

Year 1 carbon sequestration rate (tonnes CO2e/ac/yr):

The CCX bases its contract prices in terms of metric tonnes 

(1 tonne = 2,205 pounds av).

Default: 1.50 tons CO2e/ac/yr and “Constant”

Sequestration rate is... “Constant” or “Variable.” Like the 

carbon price, the sequestration rate may be “Constant” or 

“Variable.” If it is “Constant,” the Year 1 rate should remain 

unchanged throughout the project life (a warning will appear if it varies). If it is “Variable,” the Year 1 rate should be 

different for at least one year in the project life (a warning 

will appear if it is constant).

Default: Constant

Carbon reserve pool factor: Each year that carbon is 

sequestered, the CCX requires that 20% be placed into 

a “Carbon Reserve Pool” to act as an insurance against 

catastrophic losses. If a catastrophic loss occurs, the landowner’s carbon liability may be limited to this reserve. If 

the landowner decides to harvest, the liability extends to the 

amount harvested.

Although the landowner retains ownership of this reserve, it 

may not be traded until the final year. In this spreadsheet’s 

cash flow and rate of return calculations, it is assumed that 

the entire carbon reserve pool is traded in the final year.

Default: 20%

Initial carbon price applies to the second counter year because carbon is traded in the year after it is sequestered, so 

the earliest that carbon could be traded is counter year 2. 

Default: $3.50/tonne CO2e

Carbon price is...: “Constant” or “Variable.” Like the 

carbon sequestration rate, the price may be “Constant” or 

“Variable.” If it is “Constant,” the Initial carbon price should 

remain unchanged throughout the project life (a warning 

will appear if it varies). If it is “Variable,” the Initial carbon 

price should be different for at least one year in the project 

life (a warning will appear if it is constant).

Default: Constant

Aggregator’s fee is an annual cost percentage multiplied 

by the carbon credit benefit each year. It is incurred when 

carbon is traded.

Default: 10%

Verification fee is a cost per tonne that is multiplied by the 

carbon actually traded each year.

Note: except for the final year, this does not include the carbon in the reserve.

Default: $0.25/tonne CO2e

Annual re-certification cost: This annual fee is the cost for 

the tract to remain in the certification program.

Default: $0/tract

Trading fee is the per-tonne fee charged by the Chicago 

Carbon Exchange (CCX), multiplied by the carbon actually 

traded each year.

Note: except for the final year, this does not include the carbon in the reserve pool.

Default: $0.20/tonne CO2e

Other annual costs is a catch-all placeholder to accommodate other ongoing costs not explicitly incorporated into this 

model.

Default: $0.00/acre

Up-front costs sensitivity factor (UFCSF) makes it easy to 

run a sensitivity analysis on all the up-front costs. The upfront costs consist of the

	Initial inventory cost

	Management plan cost

	Certification cost

	Other up-front costs

Normally the UFCSF is set at 0%. Then all four up-front 

costs are calculated as specified in this cash flow inputs 

table. Further examples may clarify how this number works.

	If the UFCSF is 10%, all four up-front costs are increased by 10%.

	If the UFCSF is – 20%, all four up-front costs are decreased by 20%.

	If the UFCSF is – 100% (that is, negative 100%), there 

are no up-front costs.

A break-even value for the UFCSF is included in the Sensitivity Analysis table, and table 7 contains a sensitivity analysis for this variable.

Note that for the UFCSF to work correctly, the up-front 

costs in table 1 (cells M7:M10) must be entered as a function of the total up-front costs (cell M19).

Default: 0%
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CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests

Annual costs sensitivity factor (ACSF) makes it easy to 

run a sensitivity analysis on all the annual costs.

The annual costs consist of the

	Aggregator’s fee

	Verification fee

	Annual re-certification cost

	Trading fee

	Other annual costs

Normally, the ACSF is set at 0%. Then all five annual costs 

are calculated as specified in table 1. Further examples may 

clarify how this number works.

	If the ACSF is 10%, all five annual costs are increased by 

10%.

	If the ACSF is – 20%, all five annual costs are decreased 

by 20%.

	If the ACSF is – 100% (that is, negative 100%), there are 

no annual costs.

A break-even value for the ACSF is included in the Sensitivity Analysis table and table 7 contains a sensitivity analysis 

for this variable.

Default: 0%

End-of-project costs sensitivity factor (EOPCSF) makes 

it easy to run a sensitivity analysis on both end-of-program 

costs. The end-of-program costs consist of the

	Ending inventory cost

	Other end-of-project costs

Normally the EOPCSF is set at 0%. Then both end-of-project costs are calculated as specified in this cash flow inputs 

table. Further examples may clarify how this number works.

	If the EOPCSF is 10%, both end-of-project costs are increased by 10%.

	If the EOPCSF is – 20%, both end-of-project costs are 

decreased by 20%.

	If the EOPCSF is – 100% (negative 100%), there are no 

end-of-project costs. 

A break-even value for the EOPCSF is included in the 

Sensitivity Analysis table, and table 7 contains a sensitivity 

analysis for this variable.

Note that for the EOPCSF to work correctly, the end-ofproject costs in table 1 (cells M12:M13) must be entered as 

a function of the total end-of-project costs (cell M20).

Default: 0%

Initial inventory cost is the total cost of doing the initial 

inventory. One of the initial up-front costs, it is on a pertract basis.

Default: = total_up-front_costs × 50% or $1,000/tract

Management plan cost is the cost of writing the management plan for the forest tract. A management plan is required for certification and thus for carbon trading. It is one 

of the initial up-front costs and is on a per-tract basis.

Default: = total_up-front_costs × 50% or $1,000/tract

Certification cost is the initial forest certification costs. 

Forest certification is required for CCX forest carbon offset 

trading and is one of the initial up-front costs on a per-tract 

basis.

Default = total_up-front_costs × 0% or $0/tract

Other up-front costs is a catch-all placeholder to accommodate one-off costs that have not been explicitly incorporated into this model. It is one of the initial up-front costs 

and is on a per-tract basis.

Default = total_up-front_costs × 0% or $0/tract

Contract year (Year that up-front costs occur) is the year 

in which the initial inventory, management plan, certification, and other up-front costs are incurred. It is assumed to 

be the year in which a contract with an Aggregator is entered. It also specifies the year in which PV (Present Value) 

is calculated.

NOTE: Some landowners might have paid up-front costs 

before entering a carbon contract. These are sunk costs and 

should not be considered in the evaluation of the present 

contract unless they could somehow be recovered if the contract is not entered.

Default: 6

Ending inventory cost is the cost (if any) of doing a closing 

inventory prior to the final carbon payout.

Note that entering this variable as a function to total_end_

of_project_costs will allow the use of “Goal Seek” to find 

the maximum end-of-project costs that would still return the 

required rate of return as represented by the hurdle rate.

Default: total_end_of_project_costs × 100%

Other end-of-project costs is a catch-all placeholder to 

accommodate other end-of-project costs that have not been 

explicitly incorporated into this model.

Note that entering this variable as a function to total_end_

of_project_costs will allow the use of “Goal Seek” to find 

the maximum end-of-project costs that would still return the 

required rate of return as represented by the hurdle rate.

Default: total_end_of_project_costs × 0%

Hurdle rate is the interest rate that investors require for this 

investment to be worth the risk. It may represent the cost of 

capital or the next best alternative investment with similar 

risk.

The hurdle rate is used to calculate the total net benefit. It is 

also used as the reinvestment rate in the calculation of the 

MIRR.
18

General Technical Report FPL–GTR–180

IMPORTANT! The hurdle rate should not include inflation. 

Since inflation is not included into costs and revenues in this 

worksheet model, inflation should not be incorporated into 

the hurdle rate. In economic terms, this hurdle rate is a real 

(not a nominal) rate of return.

To change a nominal interest rate (including inflation) into a 

real rate, use the formula

Real rate = [(1 + Nominal rate)/(1 + Inflation)] – 1,

where all interest rates are in decimal form.

For example, 

Nominal rate is 9.2%

Inflation rate 4.0%

Real rate [(1 + 0.092)/(1 + 0.040)] – 1

Real rate 0.050 = 5.0%

Default: 5.0%

Finance rate is used in the calculation of the modified IRR. 

It is the cost of borrowed money invested in this project.

IMPORTANT! Like the hurdle rate, the finance rate should 

not include inflation. See the hurdle rate for an example of 

how to convert a nominal interest rate, which includes inflation, into a real interest rate without inflation.

Default: 5%

Count pre-contract carbon? “No” or “Yes”

If “No,” then the sequestered carbon stocks in years prior to 

certification will not be counted or available for trading.

If “Yes,” then tonnes of sequestered carbon from the precontract years back to the starting year will be summed and 

available for trading in the year after certification. The Chicago Climate Exchange (CCX) now allows credits for new 

managed forest offset projects only from the year in which 

there was a forest inventory conducted.

Default: “No”

End-of-project year: CVal is set up to begin calculations 

seven years before the end-of-project year because the CCX 

began trading in 2003 and Phase 2 of its protocol extends to 

2010.

CVal can be modified to perform calculations for an endof-project year up to seven years after the present time. In 

other words, if the present year is 2008, the latest end-ofproject year could be 2015. However, the end-of-project 

year should not be later than the date the current protocol is 

set to expire.

Default: 2010

Total up-front costs (M19) is a variable that can be used 

with “Goal Seek” to determine the magnitude of up-front 

costs that will make the total net benefits = $0.

The total up-front costs equal the sum of initial inventory 

cost, management plan cost, certification cost, and other 

up-front costs; that is, the sum of cells M7–M10. Total_upfront_costs (in cell M19) should be entered as a value, rather 

than by formula.

IMPORTANT! If the value for total_up-front_costs is initially set at $0, then the IRR and MIRR will be undefined. 

In addition, the Maximum up-front costs sensitivity factor 

found by running a break-even sensitivity analysis using 

macro or “Goal Seek” will be meaningless.

If the user then wants to determine what total up-front cost 

will make the total net benefit = $0, cells M7–M10 should 

be set as a function of total_up-front_costs. Goal Seek can 

then be used to set NPV = $0 by changing total_up-front_

costs.

For example, if Initial inventory and Management plan both 

make up 50% of total_up-front_costs, with Certification 

and Other up-front costs both being $0, M7 and M8 should 

both be temporarily specified as “ = total_up-front_costs × 

0.5” and M9 and M10 should both be “0,” or “= total_upfront_costs × 0.0”. Next, use Tools-Goal Seek and Set cell 

G8 (the total net benefit) to value 0 by changing cell M19 

(total_up-front_costs). Combining the values for cells M7 

and M8 will give the total up-front cost that breaks even 

(i.e., total net benefit =$0).

IMPORTANT! If you do this, make sure that the percentages for the four up-front costs add up to 100% (e.g., 50% 

Initial inventory, 50% Management plan, 0% Certification 

cost, and 0% Other up-front costs).

Resetting the default cash flow inputs in Tools-Scenarios 

will restore $1000 values to initial inventory and management costs. The Scenarios tool cannot restore formulas. 

After running the Scenarios tool, the “total up-front costs” 

variable will have no dependents, and Goal Seek will not 

work with this variable.

Resetting the default cash flow inputs using the “Restore_

Default_Values” macro will avoid this problem.

Default: $2,000

Total end-of-project costs (M20) is a variable that can be 

used with “Goal Seek” to determine the magnitude of endof-project costs that will make the total net benefit = $0.

The total end-of-project costs equal the sum of Ending inventory and Other end-of-project costs; that is, the sum of 

cells M12–M13. Total_end_of_project_costs should be entered as a value, rather than by formula.

IMPORTANT! If the value for total_end_of_project_costs 

is initially set at $0, then the Maximum end-of-project costs 

sensitivity factor found by running a break-even sensitivity 

analysis using macro or “Goal Seek” will be meaningless.
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CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests

If the user then wants to determine what total_end_of_

project_costs will make the total net benefit = $0, cells 

M12:M13 should be set as a function of total_end_of_project_costs. Goal Seek can then be used to set total net benefit 

= $0 by changing total_end_of_project_costs.

For example, if ending inventory makes up 100% of total_

end_of_project_costs, with Other end-of-project costs being 

0%, M9 should both be temporarily specified as 

“= total_End_of_project_costs × 100%” and M10 should be 

either “0” or 

“= total_End_of_project_costs × 0%”. Next, use Tools-Goal 

Seek and Set cell G8 (the total net benefit) To value 0 By 

changing cell M20 (total_end_of_project_costs). Combining 

the values for cells M9 and M10 will give the total end-ofproject cost that breaks even (i.e., total net benefit = $0).

IMPORTANT! If you do this, make sure that the percentages for the two end-of-project costs add up to 100% (e.g., 

100% Ending inventory and 0% Other end-of-project costs).

NOTE: Resetting the default cash flow inputs in ToolsScenarios in the non-macros version of CVal will restore 

$250 values to Ending inventory and $0 to Other end-ofproject costs. The Scenarios tool cannot restore formulas. 

After running the Scenarios tool, the “total end-of-project 

costs” variable will have no dependents, and Goal Seek will 

not work with this variable. Resetting the default cash flow 

inputs using the “Restore_Default_Values” macro will avoid 

this problem.

Default: $250
20

General Technical Report FPL–GTR–180

Appendix 3—CVal’s Macros

This spreadsheet file contains macro scripts that may be 

useful for a user. They are optional and located on the 

worksheet tab labeled “Macro Scripts.” CVal comes in two 

versions – with and without macros. The CVal spreadsheet 

was constructed without macros because macros can carry 

viruses and because not all versions of Excel support macros. Everything that these scripts do can be done without 

macros. However, using macro scripts may make certain 

repetitive operations easier. The CVal version with macros 

has the following scripts pre-installed. In addition, this version has buttons on the CVal worksheet to make it easier to 

run a full break-even analysis and to store and re-store userentered input values.

The macros are divided into two groups: break-even macros 

and utility macros. Following the descriptions of the macros 

is a section on using these macros scripts.

Break-Even Macros

The break-even macros all use Excel’s built-in “Goal Seek” 

tool to find values for the variables that would still provide 

the minimum desired rate of return. That is, the macros find 

the values that will make the net benefits (costs) = $0.

	Min_Carbon_Price finds the minimum initial carbon 

price. Note that for this macro to provide meaningful 

results, it is important that the carbon prices in all years 

in table 2 be entered by formula as a function of the first 

year’s price.

	Min_Tract_Size finds the minimum tract size given the 

fixed up-front costs that occur regardless of tract size.

	Min_Sequestration_Rate finds the minimum carbon 

sequestration rate. Note that for this macro to provide 

meaningful results, it is important that the carbon sequestration rates in all years in table 2 be entered by formula 

as a function of the first year’s sequestration rate.

	Max_Up-front_Costs finds the maximum up-front costs 

that could be paid. Note that for this macro to provide 

meaningful results, it is important that the four up-front 

costs in table 1 be entered by formula as a function of the 

total up-front costs.

	Max_End_of_Project_Costs finds the maximum end-ofproject costs that could be paid. Note that for this macro 

to provide meaningful results, it is important that the two 

end-of-project costs in table 1 be entered by formula as a 

function of the total end-of-project costs.

	Max_Annual_Costs_Sensitivity finds maximum percentage that annual costs could increase.

	Max_Up-front_Costs_Sensitivity finds the maximum 

percentage that up-front costs could increase. Note that 

for this percentage to be meaningful, total up-front costs 

cannot be $0.

	Max_End_of_Project_Costs_Sensitivity finds the maximum percentage that end-of-project costs could increase. 

Note that for this percentage to be meaningful, total endof-project costs cannot be $0.

	Breakeven_Analysis automatically runs break-even 

analyses to find the minimum carbon price, the minimum 

tract size, the minimum sequestration rate, the maximum 

up-front costs, the maximum end-of-program costs, the 

maximum annual costs sensitivity, the maximum up-front 

costs sensitivity, and the maximum end-of-program costs 

sensitivity. The macro pastes the results into the Breakeven analysis table and restores the original user-entered 

variables into the input tables.

 Note that for results from this macro to be meaningful, 

formulas must be entered in table 1 for the up-front costs 

and end-of-program costs and in table 2 for the carbon 

prices and carbon sequestration rates, as discussed in the 

individual break-even analysis macros above.

Utility Macros

	Store_Starting_Values stores the user-entered starting 

input values in table 8, the Storage Table for Starting Values. These values include user-entered variables in table 1 

and table 2, the user-entered variables in the sensitivity 

analysis tables, and the variables from the break-even 

analysis table. For the latter reason, Store_Starting_Values first calls and automatically runs the break-even 

analysis macro before storing any values. In the CVal version with macros pre-installed, the Store_Starting_Values 

macro may be run using the “Store values” button above 

table 1.

	Restore_Starting_Values restores the starting values 

from table 8, the “Storage Table for Starting Values.” 

Note that the restored values include those in the breakeven analysis table. In the CVal version with macros preinstalled, the Restore_Starting_Values macro may be run 

using the “Restore values” button above table 1.

	Restore_Default_Values restores the default variable 

values that originally came with the spreadsheet, including those in the break-even analysis table.

	Fix_Constant_Carbon_Prices fixes the annual carbon 

prices in table 2 if they are supposed to be constant but 

there was some warning message indicating otherwise.

	Fix_Constant_Carbon_Sequestration Rates fixes the 

annual carbon sequestration rates in table 2 if they are 

supposed to be constant but there was some warning message indicating otherwise.

To use these macro scripts

For CVal with macros pre-installed...

	For a full break-even analysis select the “Run B-E” button to the right of the Sensitivity Analysis table. This runs 
21

CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests

the Breakeven_Analysis macro, which finds the minimum 

initial carbon price, the minimum tract size, the minimum 

year 1 carbon sequestration rate, and the maximum total 

annual and up-front costs that would still provide the 

minimum desired rate of return on investment (i.e., the 

hurdle rate).

	For individual break-even analyses, click the “hot” areas 

in the titles above each variable in the Break-Even Analysis table.

	To store user-entered starting values, including those from 

the Break-Even Analysis table and user-entered variables 

from the sensitivity analyses, select the “Store values” 

button above table 1.

	To restore user-entered starting values, including those 

from the break-even analysis table and user-entered variables from the sensitivity analyses, select the “Restore 

values” button above table 1.

	To restore the original sample values that came with the 

CVal program, select the “hot” area in the “Click here to 

restore original values” box that is just below the Cash 

Flow Inputs title.

	To run these or any other installed macros, go to ToolsMacro-Macros-[Select_Macro_Name]-Run

For CVal without macros pre-installed...

	First set up a “Do nothing” macro. To do this, go to ToolsMacros-Record New Macro. Use the default to store 

the macro in “This workbook.” The default macro name 

(e.g., “Macro1”) is also fine. Give the macro a short-cut 

keyboard combination, if you wish. Then go back into 

Tools-Macros-Stop Recording. There will now be a “Do 

nothing” macro set up that you can edit.

	Open the “Do nothing” macro. To do this, go to ToolsMacros-[Select_Macro_Name]_Edit.

	Now click the Macro Scripts worksheet and copy the full 

macro script or scripts that you want to be able to run 

beginning with the “Sub” cell and ending with the “End 

Sub” cell (the parts between the grayed areas). If you 

want to copy all the macros, begin with the Break_Even_

Macros title and copy all the way down to the bottom of 

the macro scripts.

	Paste this full macro script over the existing macro script 

in the “Do nothing” macro in the macro editing box. 

	Close the macro editing box and return to Microsoft Excel. To do this, hit the red X (close) button in the upper 

right corner of the macro editing box, or go to File-Close 

and Return to Microsoft Excel on the macro editing worksheet.

	Run the macro by first opening the CVal worksheet page. 

Then go to Tools-Macro-Macros-[Select_Macro_Name]-

Run
22

General Technical Report FPL–GTR–180

Summary financial information for Peavey Pines

Total net benefit at 5.0% valued in year 6 : 504$ 

Internal rate of return : 16.6%

Modified internal rate of return* : 13.2%

 *MIRR at a finance rate of 5.0% and a reinvestment rate of 5.0%.

NOTE: Pre-contract sequestered CO2e IS NOT included in the benefits.

Benefits and costs discounted at the hurdle rate of 5.0%

 ------------- Total ------------- --- Annualized over 3 years ---

Per acre Per tract Per acre Per tract

Benefits valued as of year 6 $ 14.16 $ 3,540 $ 5.20 $ 1,300

Costs valued as of year 6 (12.14) (3,036) (4.46) (1,115)

$ 2.02 $ 504 $ 0.74 $ 185

$ 2.33 $ 583 $ 0.74 $ 185

Net benefit valued as of year 6 

Net benefit valued as of year 9 

NOTE: Per acre and per tract annualized net benefits valued at year 6 and year 9 are identical 

because the hurdle rate and finance rate are identical at 5.0%

Screenshot 2—CVal’s benefits and costs table.

Screenshot 1—CVal’s summary financial information.
23

CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests

Break-even sensitivity analysis for Peavey Pines

Minimum 

initial 

carbon 

price 

($/tonne 

CO2e)

Minimum 

tract size 

(acres)

Min. yr. 1 

carbon 

sequestration 

rate (tonnes 

CO2e/ac/yr)

Maximum total 

up-front costs 

($/tract)

Maximum 

total end-ofproject costs 

($/tract)

Maximum 

annual costs 

sensitivity 

factor

Maximum up-front 

costs sensitivity 

factor

Maximum 

end-of-project 

costs 

sensitivity 

factor

$ 204 1.22 $ 2,504 $ 806 2.95 62% 25% 222%

WARNINGS!

These values only change by running a "Breakeven_Analysis" macro.

The maximum total up-front and end-of-project costs macros require formulaic specification of up-front costs 

in Table 1. The minimum price and sequestration rate macros require formulaic specification of price and 

carbon sequestration rate in Table 2. The full break-even analysis macro requires all four formulaic 

specifications.

If there are no up-front or end-of-project costs, their respective sensitivity factors will be meaningless.

Run B-E

Screenshot 3—CVal’s break-even sensitivity analysis table.
24

General Technical Report FPL–GTR–180

1. CASH FLOW INPUTS

 Click on Tools-Scenarios-Default-Show to restore default values

Tract size 250 acres Initial inventory 

cost $ 1,000 per tract

Year 1 carbon 

sequestration rate 1.50 

tonnes 

CO2e/ac/yr

Management 

plan cost $ 1,000 per tract

Sequestration rate is... Constant Certification cost $ - per tract

Carbon reserve pool 

factor 20% Other up-front costs $ - per tract

Initial carbon price $ 3.50 per tonne CO2e

Contract year 

(Year that upfront costs 

occur)

 6 (counter 

year)

Carbon price is... Constant Ending inventory 

cost $ 250 per tract

Aggregator's fee 10% Other end-ofproject costs $ - per tract

Verification fee $ 0.25 per tonne CO2e Hurdle rate 5.0%

Annual re-certification 

cost $ - per tract Finance rate 5.0%

Trading fee $ 0.20 per tonne CO2e Count precontract carbon? No

Other annual costs $ - per acre End-of-project 

year

2010

Up-front costs 

sensitivity factor

0%

Annual costs 

sensitivity factor 0% Total up-front costs $ 2,000 per tract

End-of-project costs 

sensitivity factor 0% Total end-ofproject costs $ 250 per tract

WARNINGS FOR THE INPUT TABLE (below):

Screenshot 4—CVal’s main user-entered input variables.
25

CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests

Year

Counter 

year

Beginning 

balance 

($/acre)

Interest 

earned 

(Interest 

charged) 

($/acre)

Carbon 

credit 

benefit 

paid 

($/acre)

Total costs 

($/acre)

Ending 

balance 

($/acre)

2003 1 -$ -$ -$

2004 2 -$ -$ -$ -$ -$

2005 3 -$ -$ -$ -$ -$

2006 4 -$ -$ -$ -$ -$

2007 5 -$ -$ -$ -$ -$

2008 6 -$ -$ -$ $ (8.00) (8.00)$

2009 7 (8.00)$ (0.40)$ 4.20$ $ (0.96) (5.16)$

2010 8 (5.16)$ (0.26)$ 4.20$ $ (1.96) (3.18)$

2011 9 (3.18)$ (0.16)$ 7.35$ $ (1.68) $ 2.33

Year

Specified 

counter year

Total net 

benefits 

(costs) at 

5.0% 

Internal rate of 

return

Modified IRR 

at 5.0% 

finance and 

5.0% 

reinvestment 

rates

Ending 

balance at 

5.0% finance 

and 5.0% 

reinvestment 

rates

$ 504 16.6% 13.2% 583 $ 

2003 1 $ 4,154 39.4% 20.8% 6,137 $ 

2004 2 $ 3,508 38.5% 21.3% 4,936 $ 

2005 3 $ 2,822 36.8% 21.6% 3,782 $ 

2006 4 $ 2,095 33.7% 21.2% 2,673 $ 

2007 5 $ 1,323 27.9% 19.2% 1,608 $ 

2008 6 $ 504 16.6% 13.2% 583 $ 

2009 7 $ (365) -6.8% -5.1% $ (402)

2010 8 $ (1,286) -55.0% -55.0% $ (1,350)

NOTE: Pre-contract sequestered CO2e IS NOT included in the benefits.

Maximum: 4,154 $ 39.4% 21.6% 6,137 $ 

Maximum in year: 1 1 3 1

5. Sensitivity of Total net benefits (costs), IRR, MIRR, and ending 

balance to the specified counter year in which up-front costs occur 

for Peavey Pines

Screenshot 6—CVal’s sensitivity analysis table for the year in which up-front costs 

occur.

Screenshot 5—CVal’s ending balance calculations from table 3 with final ending 

balance highlighted.
26

General Technical Report FPL–GTR–180

Initial carbon 

price 

($/tonne 

CO2e)

Total net 

benefits 

(costs) at 

5.0% ($/tract)

Internal rate of 

return (%)

Modified IRR 

at 5.0% 

finance and 

5.0% 

reinvestment 

rates (%)

Final ending 

balance at 

5.0% finance 

and 5.0% 

reinvestment 

rates ($/tract)

$ 504 16.6% 13.2% 583 $ 

$ 1.00 $ (1,772) -52.7% -43.2% $ (2,051)

$ 2.00 $ (861) -17.8% -13.0% $ (997)

$ 3.00 $ 49 6.2% 5.8% $ 56

$ 4.00 $ 959 26.4% 19.6% 1,110 $ 

$ 5.00 $ 1,869 44.8% 30.8% 2,164 $ 

$ 6.00 $ 2,779 61.9% 40.4% 3,217 $ 

$ 7.00 $ 3,690 78.3% 48.8% 4,271 $ 

$ 8.00 $ 4,600 94.0% 56.3% 5,325 $ 

$ 9.00 $ 5,510 109.4% 63.2% 6,378 $ 

$ 10.00 $ 6,420 124.4% 69.5% 7,432 $ 

Initial carbon price increment: $ 1.00

NOTE: Pre-contract sequestered CO2e IS NOT included in the benefits.

6. Sensitivity of Total net benefits (costs), IRR, MIRR, and ending 

balance to the initial carbon price for the Peavey Pines project 

beginning in counter year 6

Screenshot 7—CVal’s sensitivity analysis table showing financial measures as a 

function of the initial carbon price.
27

CVal: A Spreadsheet Tool to Evaluate the Direct Benefits and Costs of Carbon Sequestration Contracts for Managed Forests

Cost 

sensitivity 

factor

Net benefits 

(costs) with 

annual cost 

changes

Net benefits 

(costs) with upfront cost 

changes

Net benefits 

(costs) with 

end-of-project 

cost changes

504$ $ 504 $ 504

-25% 706$ -25% $ 1,004 -25% $ 561

-20% 666$ -20% $ 904 -20% $ 549

-15% 625$ -15% $ 804 -15% $ 538

-10% 585$ -10% $ 704 -10% $ 527

-5% 544$ -5% $ 604 -5% $ 515

0% 504$ 0% $ 504 0% $ 504

5% 463$ 5% $ 404 5% $ 493

10% 423$ 10% $ 304 10% $ 481

15% 382$ 15% $ 204 15% $ 470

20% 342$ 20% $ 104 20% $ 459

25% 302$ 25% $ 4 25% $ 447

30% 261$ 30% $ (96) 30% $ 436

35% 221$ 35% $ (196) 35% $ 424

40% 180$ 40% $ (296) 40% $ 413

45% 140$ 45% $ (396) 45% $ 402

50% 99$ 50% $ (496) 50% $ 390

Sensitivity factor increment: 5%

7. Sensitivity of net benefits or costs to percentage changes in the 

annual, up-front costs and end-of-project costs for Peavey Pines

Screenshot 8—CVal’s sensitivity analysis table showing net benefits (costs) as a 

function of the cost sensitivity factors for annual costs, up-front costs, and end-ofproject costs.