🌿 ACCF Batch 2 — Formula Sheet
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Formula Sheet

Key formulas for climate finance, economics, and business analysis

Carbon & Climate Formulas

Carbon Tax Revenue

Revenue = Emission Rate × Carbon Tax Rate × Output
Emission Rate = tonnes CO₂ per unit of output
Carbon Tax Rate = $/tonne CO₂ (e.g., $50/tonne)
Output = units of production
Used to estimate government revenue from carbon taxes or model firm-level carbon costs.

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Emissions Intensity

Emissions Intensity = Total GHG Emissions / Economic Output
Total GHG Emissions = tonnes CO₂ equivalent (tCO₂e)
Economic Output = GDP, revenue, or units of production
Measures the carbon efficiency of an economy or business. Used in WACI calculations for investment portfolios.

Carbon Budget Remaining

Remaining Budget = Total Budget − Cumulative Emissions (1850–present)
Total Budget = e.g., ~500 GtCO₂ for 1.5°C (50% probability)
Cumulative Emissions = historical emissions since pre-industrial era
The IPCC estimates approximately 500 GtCO₂ remaining from Jan 2020 for a 50% probability of staying under 1.5°C.

Avoided Emissions

Avoided Emissions = Baseline Emissions − Project Emissions − Leakage
Baseline Emissions = emissions that would occur without the project
Project Emissions = actual emissions during project operation
Leakage = emissions displaced to outside the project boundary
The fundamental formula for calculating carbon credits in the voluntary carbon market (VCS, Gold Standard).

Weighted Average Carbon Intensity (WACI)

WACI = Σ (Portfolio Weight_i × Carbon Intensity_i)
Portfolio Weight_i = portfolio value in company i / total portfolio value
Carbon Intensity_i = company i's GHG emissions / company i's revenue
The TCFD-recommended metric for assessing portfolio exposure to climate-related risks.

Economics Formulas

GDP (Expenditure Approach)

GDP = C + I + G + (X − M)
C = Private consumption (household spending)
I = Investment (business capital expenditure)
G = Government spending
X = Exports    M = Imports

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Inflation Rate

Inflation Rate = ((CPI_current − CPI_previous) / CPI_previous) × 100
CPI = Consumer Price Index

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Real GDP

Real GDP = Nominal GDP / GDP Deflator × 100
Nominal GDP = GDP measured in current prices
GDP Deflator = price level index (base year = 100)

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Price Elasticity of Demand (PED)

PED = % Change in Quantity Demanded / % Change in Price
|PED| > 1 → Elastic (demand sensitive to price); |PED| < 1 → Inelastic; |PED| = 1 → Unit elastic. Carbon taxes are more effective on elastic goods.

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Unemployment Rate

Unemployment Rate = (Unemployed / Labour Force) × 100
Labour Force = Employed + Unemployed (seeking work)

Externality (Social Cost)

Social Cost = Private Cost + External Cost
The Social Cost of Carbon (SCC) is the estimated marginal external cost of emitting one additional tonne of CO₂. Used to set optimal carbon tax rates.

Finance & Bonds Formulas

Bond Yield (Current Yield)

Current Yield = Annual Coupon Payment / Current Market Price × 100
The green bond premium (greenium) means green bonds typically yield slightly less than equivalent conventional bonds due to excess demand from ESG investors.

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Net Present Value (NPV)

NPV = Σ [CF_t / (1 + r)^t] − Initial Investment
CF_t = cash flow at time t
r = discount rate
t = time period
NPV > 0 → project adds value. Used in climate project appraisal; a higher social discount rate can undervalue long-term climate benefits.

Blended Finance Leverage Ratio

Leverage Ratio = Total Investment Mobilised / Public / Concessional Finance Used
Measures how much private capital each unit of public finance mobilises. OECD data suggests a leverage ratio of 4–7x for typical blended finance structures.

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Debt Service Coverage Ratio (DSCR)

DSCR = Net Operating Income / Total Debt Service
DSCR > 1 means sufficient income to cover debt obligations. Critical for green project finance viability assessment. Lenders typically require DSCR ≥ 1.25.

Return on Green Investment

ROGI = (Net Climate Benefits + Financial Returns) / Total Green Investment
A broad concept for capturing co-benefits of green investments beyond financial returns, including carbon savings, ecosystem services, and social benefits.

Business & Accounting Formulas

Gross Profit Margin

Gross Profit Margin = (Revenue − COGS) / Revenue × 100
COGS = Cost of Goods Sold

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Return on Equity (ROE)

ROE = Net Income / Shareholders' Equity × 100

Debt-to-Equity Ratio

D/E = Total Debt / Total Shareholders' Equity
Higher D/E = greater financial leverage and risk. Green bonds can improve a company's D/E profile if they replace costlier conventional debt.

Break-Even Point

Break-Even (units) = Fixed Costs / (Price per Unit − Variable Cost per Unit)
The contribution margin (Price − Variable Cost) absorbs fixed costs. Useful for assessing viability of renewable energy projects.

Accounting Equation

Assets = Liabilities + Owners' Equity
The fundamental balance sheet identity. Stranded asset write-downs reduce assets and equity simultaneously.

EBITDA

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortisation
A proxy for operating cash flow. Used to compare green energy projects across different capital structures and tax environments.

Quick Reference Cheat Sheet

GDP Formula
C + I + G + (X − M)
Inflation Rate
((CPI₁ − CPI₀) / CPI₀) × 100
Real GDP
Nominal GDP / Deflator × 100
Unemployment Rate
(Unemployed / Labour Force) × 100
PED
%ΔQd / %ΔP
Carbon Tax Revenue
Emission Rate × Tax × Output
Avoided Emissions
Baseline − Project − Leakage
Emissions Intensity
GHG Emissions / Output
WACI
Σ (Weight_i × Intensity_i)
Bond Current Yield
Coupon / Price × 100
NPV
Σ CF_t/(1+r)^t − Investment
Leverage Ratio
Total Investment / Public Finance
DSCR
Net Operating Income / Debt Service
Gross Profit Margin
(Revenue − COGS) / Revenue × 100
ROE
Net Income / Equity × 100
D/E Ratio
Total Debt / Equity
Break-Even (units)
Fixed Costs / Contribution Margin
Accounting Equation
Assets = Liabilities + Equity
Social Cost
Private Cost + External Cost
EBITDA
Net Income + I + T + D + A