Adding carbon to the real estate pro forma: 

NOI/cap rate = Value & Sale Price (Value) minus Costs = Profit

However , this approach take into account externalities that the project create for example in terms of carbon. the Low2No team will modify traditional real estate metrics to account for its carbon liability, changing energy prices, potential policy changes, and growing opportunities to utilize alternative financing. We will use a "relative" approach to evaluate alternatives: calculating the "delta" between Low2No and a hypothetical base case building – adjusting traditional net present value (NPV) analyses to reflect the future carbon benefit (reducing the future carbon liability by mitigating it in the building). Low2No apporach:

NPVc = NPV +/- PVc

NPV: Use traditional discount cash flow (DCF) to calculate NPV, using a 6.5% discount rate and a 40-year time horizon.

PVc: Calculate a present value (PVc) of the reduced future carbon liability (the present value of the carbon benefit) using the same time horizon and discount rates, but modeling the future increase of the value of carbon according to Carbon Appraisal in UK Policy Appraisal: A Revised Approach, 2009. It should be noted that these benefits are relative to the carbon they are avoiding, namely the carbon the baseline alternative is producing.

NPVc: Adjust NPV by PVc, thus calculating a carbon adjusted NPV by which the alternatives will be compared.

This helps to see how the new requirement for buildings to produce as much energy as they consume will affect the project economics. It also helps to illuminate the tradeoff between mitigating carbon now with building interventions, and planning for it as a future liability, which is only growing riskier and more expensive.