Guidance

Valuing the carbon net impacts of FCERM projects

Published 29 June 2022

Applies to England

This guidance is for risk management authorities (RMAs) and project teams.

You should read it alongside the FCERM appraisal guidance and the partnership funding guidance.

By using it, you are applying the HM Treasury Green Book guidance and the Department for Business, Energy & Industrial Strategy (BEIS) Green Book supplementary guidance on greenhouse gas emissions.

The guidance covers carbon emissions:

• avoided by reducing flooding or coastal erosion risks
• from constructing and maintaining the FCERM solutions

It explains how you can calculate an overall net carbon value for your project. This may be either positive or negative. You must add this net value to the overall economic benefits you use in your cost benefit analysis and the partnership funding calculator.

We will monitor the effect of this guidance on projects to help us make future improvements.

1. When to use this guidance

Transition to current FCERM appraisal and partnership funding guidance explains when you should use this guidance.

You must consider carbon in all stages of your FCERM appraisal process. You should use packages of measures designed to reduce whole life carbon emissions as well as optimising the flood risk mitigation outcomes.

2. Levels of calculation in the carbon impacts tool

There are 3 different levels of calculation in the carbon impacts tool for flood alleviation projects and one level for erosion mitigation. You should use the level that is proportionate to the data you have available. You can combine this result with the whole life carbon emissions and any change in sequestration to produce a net carbon benefit.

3. The 4 sources of carbon used in the tool

The benefit part of the tool uses 4 sets of data.

These are the carbon costs of:

• refurbishing a residential home after it has flooded – this has a relationship with the economic cost of refurbishment
• replacing a car and disposing of the damaged car – this assumes the car is written off if it floods to 35cm or deeper
• living in and travelling to temporary accommodation
• demolishing a home before it is eroded

There is not much data available to value the carbon implications for non-residential properties reliably and consistently. To overcome this, you can assume the relationship between carbon and economic damage is the same for both residential and non-residential properties. This allows you to include these large carbon emissions and keeps the appraisal simple and proportionate.

These 4 sets of data cover the largest carbon consequences of the most commonly valued impacts in FCERM economic appraisal.

The tool also includes tables you can use to apply valuations and discounting and to present summary information in your business case.

4. Estimating carbon avoided

You should use the flood or erosion calculation level appropriate for the amount of data you have available. The carbon impacts tool will estimate the total carbon emissions avoided and total carbon present value benefits for each level.

You should repeat this for each shortlisted ‘do-something’ option. You can copy and rename the worksheets in the tool to record the calculations for each option.

The appraisal period or duration of benefits you use in the tool must match the time span used to calculate your present value benefits.

If you have not already calculated your economic benefits you need to do so first using the appraisal guidance and the multi coloured manual (MCM).

5. Flood level 1

This is the simplest level. You should be able to complete it for any flood alleviation project.

5.1 Level 1 data requirements

At level 1 you need the total present value benefits of each shortlisted option. These should include all sources of benefit as calculated in the economic appraisal but exclude the carbon.

5.2 Level 1 calculation approach

There are several assumptions made at flood level 1 in the carbon impacts tool.

These assumptions are that:

• you have completed a full detailed economic appraisal including damages from a wide range of impacts
• the tool splits your total benefits across the 4 different sources of carbon and then applies the appropriate amount of carbon to each source
• there is a constant rate of economic benefits over the appraisal period, this is acknowledged as a proportionate simplification

The tool then applies for each year:

• calculated rates of carbon emissions avoided per year
• the appropriate BEIS economic value for carbon for each year

It then discounts these values. This gives a present value carbon emissions avoided value.

6. Flood level 2

You should use flood level 2 if your project is small or at an early stage.

You should use this level if you used a weighted annual average damage approach. The MCM explains how to use the weighted annual average damage approach.

You can also use this level if you:

• calculated the present value benefits for residential and non-residential properties only
• did not calculate any other categories separately

6.1 Level 2 data requirements

At level 2 you will need separate total present value benefits for residential and non-residential properties.

6.2 Level 2 calculation approach

At level 2, the tool uses the relevant conversion factor to calculate the carbon emissions for residential properties benefiting from your option. It recognises that damage to vehicles and the need for temporary accommodation will incur carbon emissions too. This is despite not valuing the economic benefits of those impacts yet.

To account for this, level 2 adds the carbon emissions for these 2 categories based on their relationship with residential property benefits.

If you already have details for vehicle and temporary accommodation benefits you should use level 3.

7. Flood level 3

You should use flood level 3 for your project if you have separate economic benefits for:

• residential properties
• non-residential properties
• temporary accommodation or evacuation
• vehicles

7.1 Level 3 data requirements

You will need the present value benefits resulting from risk mitigation to:

• residential properties
• non-residential properties
• temporary accommodation or evacuation
• vehicles

7.2 Level 3 calculation approach

The tool applies a rate of carbon emissions avoided to residential and non-residential properties, temporary accommodation and vehicles. It assumes a constant rate of economic benefits. It then applies the rates of carbon emissions avoided per year, followed by the appropriate BEIS economic value for carbon for each year.

8. Erosion level 1

You should use erosion level 1 for your project if properties are likely to be demolished. Properties could be demolished, for example, before they erode on to the beach.

8.1 Erosion level 1 data requirements

You will need the count of households at risk of erosion:

• within 20 years: medium term loss
• between 21 to 100 years: long term loss

You will need the total area of non-residential property at risk of erosion:

• within 20 years: medium term loss
• between 21 to 100 years: long term loss

You should define your households at risk of erosion as described in the partnership funding guidance for outcome measure 3 (OM3).

You can take this data directly from your project business case report or from the OM3 counts in your partnership funding calculator. You do not need an appraisal period or duration of benefits for your erosion calculations. This is because the timing of their loss is set by the 2 erosion risk bands. The erosion risk bands are within 20 years and 20 to 100 years.

You can use the tool to calculate the carbon emissions avoided by mitigating the need to demolish a non-residential property.

The carbon emissions avoided is calculated using the building’s internal floor area. You can find the floor area in the national receptor database or it may be available in your economic appraisal data.

If the floor area is not available use the average non-residential property floor areas in the MCM.

If no floor area data is available leave this section blank.

8.2 Erosion level 1 calculation approach

The tool assumes that each home will be demolished before it is eroded, and the demolition has a carbon cost. The tool calculates these carbon emissions. It converts them into an economic cost in the appropriate year and then discounts it to generate the present value carbon emissions avoided.

You should repeat this process for each option, with updated counts of property at risk within the 2 time bands. You should not include properties predicted to erode after 100 years.

9. Carbon impacts tool outputs and where to use them

For each level, the tool will give you your options:

• total carbon emissions avoided – in tonnes of CO2 emitted (tCO2e)
• total carbon present value benefits of the emissions avoided in £

You should report the present value benefit data in the economic case of your project’s latest business case. The amount of detail you should include will depend on the level you are using.

You should also include the present value benefit information in your partnership funding calculator. How you do this is explained in calculate GIA funding for FCERM projects 2020.

10. Estimating carbon emissions from construction and maintenance

You must present a whole life carbon assessment for every shortlisted option. This must include the whole life carbon costs of:

• construction
• maintenance
• operation
• decommissioning – if appropriate

You can estimate these using the ERIC tool (available to all RMAs) or the cost and carbon tool. Email carbonplanningtool@environment-agency.gov.uk to request access to the cost and carbon tool. Both tools export carbon requirements in tCO2e.

For each option, put the carbon quantities emitted in each year in the present value carbon costs tab in the tool.

The tool converts the carbon quantities you entered into economic values. It is then discounted to generate a present value. The tool calculates both the total whole life carbon emissions in tCO2e and their economic costs.

11. Sequestration and OM4

Carbon sequestration is a natural or artificial process that removes CO2e from the atmosphere.

As you develop your FCERM project you should identify opportunities to integrate measures that sequestrate carbon in your options design. There are sequestration rates for many different habitats over periods of habitat maturity. You can find this information in Enabling a Natural Capital Approach (ENCA). You should include it as part of your net carbon presentation. Sequestration information is also available in ERIC. You should measure sequestration over the same time period as your appraisal.

If you have environmental valuations in your economic appraisal, make sure you only include the sequestration value once in OM1a. This should be either as part of the environmental value or as part of the net carbon benefits.

If you have used environmental valuations from OM4 guidance, note these have carbon already embedded within them.

To include the sequestration rates in the carbon calculations, take the environmental valuations for the economic appraisal and OM1a from ENCA. This means you can separate the habitat values to get the sequestration rates and values.

You can include a tab in your carbon impacts tool based on the present value carbon costs tab. You can use this to collate sequestration and other streams of carbon emissions.

12. How to present whole life carbon assessments

Your business case should include a net carbon summary table in the economic case. The carbon impacts tool contains the table you can use in the net carbon summary table worksheet.

Table 1 shows an example of a completed net carbon summary table.

12.1 Table 1 - example of a completed net carbon table

Carbon (tCO2e)	Option 1	Option 2	Option 3
1. Whole life carbon costs over the appraisal period including construction, maintenance, operation and demolition	10,000	15,000	7,500
2. Carbon emissions avoided	5,000	30,000	500
3. Increase in carbon sequestration	0	0	500
Net carbon emissions (1 minus 2 minus 3)	5,000	-15,000	6,500

Economic value of carbon (£k)	Option 1	Option 2	Option 3
4. PV whole life carbon costs over the appraisal period including construction, maintenance, operation and demolition	2,000	3,000	750
5. PV carbon emissions avoided	1,000	4,000	70
6. Increase in carbon sequestration	0	0	5
Net carbon economic benefits (5 plus 6 minus 4)	-1,000	1,000	-675

The tool calculates your whole life carbon cost by importing the carbon costs in tCO2e and inserting them into the correct year for each option. It then applies the economic carbon value and discount to produce an economic present value.

The tool calculates the carbon emissions avoided using either the flood level 1, 2 and 3 or erosion level 1 tabs. You should build your tool copying these tabs as appropriate for your project and drawing the results into the summary table.

Using the net carbon summary table allows you to clearly identify the whole life carbon costs of each option. This information is important because it is also used for company level carbon accounting.

13. Using the partnership funding calculator

Net carbon is a valid source of OM1a benefits in the partnership funding calculator. Use the carbon impacts tool to calculate the carbon net economic benefits. The economic data used must be appropriate for the duration of benefits quoted in the partnership funding calculator. This may be different to the appraisal period in the economic case.

You must also record the carbon results in the partnership funding calculator’s economic summary worksheet.

Your net carbon economic benefits could be positive or negative. This depends on how carbon intensive your option is and the carbon benefits available. You can improve the net carbon benefits by reducing construction carbon by using low carbon options or low carbon technology.

Add the net carbon benefits to OM1a in the partnership funding calculator.

14. Values and price of carbon

The price of carbon is regularly reviewed and updated by BEIS. We will update the carbon impacts tool to include future BEIS values and other sources of new data.

The price of carbon currently in the tool (£260 in 2025) has a price date of 2020. You will need to update this using the gross domestic product (GDP) deflator after 2022.

Carbon values are discounted using the standard HM Treasury discount rate which starts at 3.5%. You can find this in the carbon tool or in the Green Book.