Avoided Conversion – Duke

In 1995 the Duke Forest Supervisory Board declared more than half of the Duke Forest as permanently off-limits for sale or development (see Google Map), leaving approximately 2,870-acres eligible for conversion should circumstances necessitate such action. Acknowledging that the University is not currently planning on taking steps that would lead to the conversion of this area, we based our Duke Avoided Conversion scenario on these 2,870 acres for demonstrative purposes. It should be noted however, that based on our consultations with Dawn Talton, if the University’s interests were otherwise aligned, the area would fall into a category of high conversion risk based on its location and its potential residential and commercial value.

The variance in cumulative credits issued to the project under CAR vs. the two ACR scenarios is similar to the results seen in the Hypothetical Acquisition Avoided Conversion Project. The use of CAR accounting methods leads to considerably more carbon offsets being generated on the project site. This advantage is established in the early years of the project, with CAR generating 76% more offsets than the reimbursement ACR scenario by year 13, and persists through year 100.

As was seen in the Hypothetical Acquisition Avoided Conversion Project, annual NPV peaks in year-one of all three project scenarios in both the 3% price increase and constant price models. Under the 3% price increase model CAR peaks $213,934 then declines steadily by ~$7,000 a year before dipping in year six due to on-site verification costs. The consistent verification cost dips are less severe for the Duke Forest than those seen in the Hypothetical Acquisition Avoided Conversion Project as the costs of verification is significantly less per acre for larger project sites. Following this dip NPV levels recover in year seven and resume their ~$7,000 annual decline until year 11 when NPV falls by 70% from its level at year 10. After this point CAR experience consistent annual NPV drops punctuated by onsite verification expenses every six years, eventually flat-lining around year 70 and terminating in year 100 with an annual NPV of $175. CAR’s pattern of annual NPV decline under the constant price model is similar to that seen in the price increase model but declines in NPV are more dramatic, causing price to reach a near flat-line state by year 40 and terminate at $3 in year 100. The annual pattern of NPV change in the ACR scenarios mimic that seen under CAR but the dips representing the onsite inventory expenditures occur in every fifth year rather than every sixth and are counterbalanced by buffer refunds in the reimbursement scenario. Additionally the severe dip in annual NPV that occurred in year 11 under CAR occurs in year six under ACR.