CRP Toolkit: Exploring the Potential for Carbon Removal Portfolio Optimization

The project resulted in the following key outcomes:

• Structuring the investment decision in negative emission technologies with a focus on investment timing and risk management.
• Development of real-options-based valuation approaches that explicitly account for the flexibility and uncertainty inherent in such investments.
• Design of a simple valuation tool for make-or-buy decisions as well as for technology-related development options.
• Development of clear communication approaches to support managerial decision-making processes.

The results support companies in making more robust and consistent investment decisions in negative emission technologies. In doing so, the project contributes to a better integration of climate strategies into financial decision-making processes.

Investments in negative emission technologies are associated with high levels of uncertainty, long time horizons, and complex risk–return profiles for companies. Classical valuation methods such as discounted cash flow (DCF) analysis capture this decision context only inadequately and may lead to distorted investment incentives.

The objective of the project was to systematically analyze this decision context and to develop suitable financial valuation approaches that better reflect the specific characteristics of investments in negative emissions.