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Your client, CarbonX, must choose where to invest next year across six carbon project types. The exhibit shows, for each type: % of pipeline, % eligible sites, risk level, average price and cost per ton, and scale (ktCO₂e/year).
Assume risk multipliers for expected eligible volume: Low = 0.95, Med = 0.80, High = 0.60.
Expected annual gross margin dollars ≈ (price − cost) × scale × %eligible × risk multiplier.
Based on the exhibit, which single project type delivers the highest expected annual gross margin dollars next year, and what is the one action you’d take first to secure that opportunity?
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Your answer:
📋 Solution:
Step 1 — Triage (who’s worth math):
Skip Soil carbon (low margin, high risk) and Landfill gas (small scale). Real contenders on margin×scale: Reforestation, Cookstoves, IFM, and DAC.
Step 2 — Quick expected gross margin ($/t × scale × %eligible × risk):
- Reforestation: 7 × (800×0.70×0.80) ≈ $3.14M
- Cookstoves: 5 × (700×0.85×0.80) ≈ $2.38M
- IFM: 6 × (500×0.65×0.95) ≈ $1.85M
- DAC: 70 × (50×1.00×0.95) ≈ $3.33M
Answer: DAC delivers the highest expected annual gross margin (~$3.3M), narrowly beating Reforestation (~$3.1M).
First action: Secure a multi-year anchor offtake LOI with a marquee buyer (price floor + volume band) to lock demand and enable rapid project financing.
