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Calculating the costs and benefits of climate action
The Climate Initiative Value Calculation (CIVIC) Workbook is a benefit-cost analysis tool created to help Indiana and US local governments measure the value of carbon-cutting actions to address climate change and evaluate the cost effectiveness of green initiatives.
Designed with input from local government staff, the workbook gives communities a validated method for weighing the costs and benefits of each project based on data specific to their needs.
The first edition of the CIVIC workbook covers 12 common sustainability projects, including community-wide programs and programs limited to local government operations. Users can experiment with program variables to evaluate multiple scenarios that differ in scale and scope. Additionally, the methodology, references, and project co-benefits are listed on each worksheet.
The CIVIC Workbook was created by students from the IU Kelley School of Business’s Net Impact chapter and Purdue University’s Environmental and Ecological Engineering program under ERI’s guidance. Questions about the tool can be submitted to email@example.com or the ERI hotline: 833-ERI-ATIU (374-2848).
Learn how to use the CIVIC Workbook
Description of the video:>> Welcome to today's webinar, which is more of a workshop, to help all of you learn how to use our new CIVIC Workbook. My name is Andrea Webster, and I'm the implementation manager at Indiana University's Environmental Resilience Institute. I'm really excited to share this tool with you today.
There was a lot of excitement, and I think there's a lot of need for something like this to exist. So we're excited to get it out there and see what you all think. So this webinar is being recorded today, we'll post the recording on our website in case you want to watch it again, or share it with your colleagues.
If you have questions throughout the presentation, you can enter them into the chat. You can unmute yourself or you can raise your hand, I encourage you to do that, throughout the presentation, I encourage you to interrupt me. My colleague, Steve Chbosky, do you wanna wave, Steve? He's gonna help moderate questions.
So, he'll interrupt me if you don't feel comfortable doing so. I would like to acknowledge that we're hosting this webinar from Indiana University in Bloomington, which is a place that is built on indigenous homelands and resources. We wanna express our gratitude to the Miami, Delaware, Potawatomi, and the Shawnee people as past, present and future caretakers of this land.
And I hope that all of you will be caretakers of our lands as well. All right, so let's get started. So, I wanna provide a little bit of background on the Environmental Resilience Institute. First, in case you're just hearing about us, we are first and foremost a Research Institute.
But we do have staff that focus specifically on helping local governments in Indiana and Midwest, as they work to make their communities more resilient. So we launched in 2017, we offer several programs to help local governments measure and reduce their greenhouse gas emissions, and prepare for the impacts of climate change.
Equity is a big part of our work, and we hope that our resources and programs will help the state address the inequitable risks and adverse impacts of climate change, that are experienced by those most vulnerable in all of our communities. Right, so let's talk a lot more about the CIVIC Workbook.
So, during our webinar today, which is more of a workshop or a training, we're gonna spend about 20 minutes reviewing one worksheet in detail. And then we'll break out into several breakout groups to give you a chance to ask us questions in a smaller group setting. So we have a team of folks here that will help you do that, and I'll introduce them later this morning.
So the purpose of this tool is to help local government officials and staff complete a benefit cost analysis of greenhouse gas reduction strategies that you may have under consideration. So we've inserted default values relevant to the state of Indiana, but these values could easily be updated for any state.
All of our worksheets are designed so that these default values need to be updated by every local government anyway. And so I really feel like any state across the country could use this workbook and I hope that you'll feel the same. And before we get too much further, I wanna acknowledge the people that helped make this project happen.
So, first and foremost, we had four students from Purdue University's Environmental and Ecological Engineering Design course. We have Julia Carrillo Tori Chillscyzn, Matthew Vining, and Elise Zaniker, three of those four students, were able to join us today and they'll be hosting our breakout sessions. They are all seniors, and if you see them applying to your programs or applying for one of your jobs, I promise that you will not regret admitting them to your program or hiring them.
They're very, very talented students. We also had a lot of support from Indiana University's Net Impact team. They are contributing a few initiatives to the next iteration of the workbook, which will be released later this spring. We designed the tool in consultation with many people, most of whom are listed here, but we consulted many local governments in Indiana to make sure that it was useful to them.
We also had content experts and benefit cost analysis experts review each tab for accuracy. However, this does not mean that they caught everything. Please let us know if you encounter an error, and we'll provide an email address and a way to contact us at the end of the presentation today.
This really is meant to be our first iteration of the tool and we plan to release more iterations later on, so there's plenty of room for this to grow and improve. All right, so this slide shows all the initiatives that are included in the workbook. Hopefully, you've taken a look at it already.
We released the document last month. And as I mentioned earlier, we're gonna release another updated version later this Spring, with more greenhouse excuse me, with more greenhouse gas production strategies. And a few other content updates, as we're already improving it. So you can access the workbook on the Environmental Resilience Institute website.
To access it, you'll click on Tools and Resources and then you'll find it under the Local Governments heading. So hopefully it's not too buried, definitely give us a shout if you can't find it. But we definitely want you to find it on our website. So, when you first open the workbook, you will find a Start Here tab.
So, this sheet provides an overview of how to use the tool. All the tabs along the bottom are various greenhouse gas producing initiatives that we included. The yellow tabs are projects that reduce greenhouse gases in your community, whereas the green tabs are those that reduce greenhouse gases coming from your local government's operations.
There these same tabs are also linked from the Table of Contents. And so you can use this Table of Contents to take notes. And it'll be increasingly more helpful as we add more initiatives to the page. So the first thing that you need to do when you're using this workbook is to enter your desired discount rate and social cost of carbon.
Both are optional, but if you choose not to use them, you'll need to enter zero in each of these cells. So, a discount rate is used to recognize that future monetary costs or benefits may be valued less than current monetary costs or benefits. So, for example, if you invested $100 today with a 10% scheme of increase, or maybe interest rate, that will grow to $110.
So in other words $110 is the future value, but when that is discounted by the rate of 10%, it's worth $100 today, which is the present value. So that may be a little confusing, but definitely reach out to us if you want more explanation, or maybe contact your local economist.
Or anyone at Indiana University in the economics department can probably help you with that too, or maybe even a little Google searching. But when you enter a discount rate here, it is automatically incorporated into all the initiatives in the workbook, using the time frame that you enter for each initiative.
So we've entered 3% as a default, which is a number that we found the whole governments often use when analyzing potential projects. Now, the social cost of carbon is a measure of the economic harm of carbon, which is expressed as $1 value of the total damages from emitting one tonne of carbon dioxide into the atmosphere.
So in this workbook, we use the social cost of carbon. It was calculated by the Obama Administration in 2016. They projected that the social cost of carbon would be $42 a tonne, I guess, tonne of carbon dioxide emitted as of 2020. So since releasing his workbook, we have learned that the Biden Administration is reviewing the social cost of carbon estimate and will likely use a much higher number, you should enter the dollar amount that you prefer.
Now, local governments could use as a dynamic social cost of carbon when that changes over time. The cost of carbon isn't increasing and it's becoming more harmful. But for simplicity's sake in this work book, we've just assumed that that cost is constant. So furthermore, ultimately, benefit from carbon reduction are experienced by all global citizens.
But for the purposes of this workbook, the social cost of carbon is assigned to either the local government or the community depending on who really pays for the implementation of the project. So we'll explain that more when we get into the individual tabs. So there are more instructions on this Start Here tab.
And when you're in the actual Excel workbook, you can scroll down and read through those. But I'm gonna jump to an initiative to walk you through it in person, live. Okay, so the text on this slide is too small for you to read. I acknowledge that, but I want you to see an overview of how each tab is organized.
So the initiative description is at the top. The blue box contains variables specific to the initiative. Some of these variables will be the same from initiative to initiative, but most of them will differ. The yellow box contains all the possible costs, and then the green box lists all the possible benefits.
So all of these assumptions are listed in the grey box in the upper right corner of the screen, but occasionally, actually quite often, we embed comments into the cells when they're specific to the cells' information, right? And we try to provide instructions in each of these embedded comments too to help you fill out the cells.
All references used to establish the benefit cost analysis are listed in the right column as well. And the results of the benefit cost analysis along with the calculated net benefits are in the colorful box at the bottom. So these are meant to be a little bit better than back of the envelope calculation.
It's really hard to project what the actual costs are gonna be. It kinda depends on when you do it and what the costs are within your local jurisdiction, but hopefully, these initiatives in these spreadsheets will give you a sense of what the cost and benefits are. All right, so let's dive into this tab as an example.
All right, so we're looking at building energy disclosure ordinance, which is a policy that can be adopted by local government to require buildings above a certain size, usually, that includes commercial and government buildings. The ordinance would require these buildings above a certain size to publicly report their annual energy use.
So both electricity and natural gas and they would report that energy use once a year. Now, these types of policies can encourage building owners to pursue energy retrofits, create jobs, and ultimately reduce carbon emissions. In 2015, as an example, the city of Atlanta announced an energy disclosure ordinance and projected a 20% reduction in commercial energy consumption by the year 2030.
So that's a huge reduction in energy use. They also projected that this ordinance would create more than 1,000 jobs a year in the first few years, and that it would reduce carbon emissions, 50%, five zero, from 2013 levels by 2030. So, Atlanta is much bigger than most communities in Indiana, of course.
But more and more Midwestern local governments are considering this policy option, including Indianapolis. And we did receive some guidance from the City of Indianapolis as we were pulling this analysis together. So on every single tab, not just this one, the white cells are the ones that you should update.
So the cells with the color include automated calculations that should not need to be updated. But you may choose to update them if you feel comfortable doing so and you find some calculations that are more relevant to your hometown. But it should be okay as is as sort of better than back of the envelope calculation as I mentioned earlier.
So the discount rates at the top here, I think you guys can see my mouse, is automatically pulled from the Start Here tab. You'll enter the time frame for which you want to run your analysis, and that's a drop down box that only goes up to 30 years.
I selected nine years for this initiative and the spreadsheet automatically calculated the present worth factor via Present Worth factor tab at the back of the workbook. So that's also automated for you. So the program variables, when I click on the first government on the cell here, is gonna pop up a little instruction message.
And it's gonna tell me to input the square footage of the smallest building size that you would like to include in the ordinance for government-owned buildings. So here I put 25,000. When I'm looking at these policies across the country, I often see it's 50,000, but it really does vary based on the community and the community size, and the variation of building sizes across the community.
All right, so I think that's that, so I'm gonna go onto the next piece. Okay, so now we're gonna look at the costs box, the yellow box. So the first cell is the number of staff required. Oops, we did that one already, okay. So the first cell is the number of staff required to draft and implement this type of ordinance.
So the salary includes benefits here. So this 59,000 is gonna include benefits. Again, we've pre populated this, you're gonna wanna update it with what you feel like an accurate salary might be for someone at your local government. So this here is the total number of buildings. So 85 is 75 plus 10.
And so as we move down into the community compliance labor, so line 23 is the average amount of time it takes a company or maybe even a local government to collect the data and input it into a software that you choose to use. So this happens once a year and we estimate that that will take three hours for a staff person to just enter 12 months of energy data for a particular building.
And that's multiplied by, The salary and benefits hourly rates of an average staff, facilities staff person, and multiplied by the number of buildings to get the 15,000 that you see here. And of course, this is Excel, so if you're ever curious about what the calculation is, you can just click on the Excel and see that in the function area.
All right, so continuing down, so line 24 is the one time cost of implementation. So, this is going to include as is in that nice note there. Gathering building inventory, communicating compliance notices, community trainings to really get people familiar with the new process and lots of other things.
And you can see on all of these comments that we cite the source, source 3, source 4, source 9. And so, you can refer to those sources, if you have questions about where that information is coming from and even just to learn more about what the initiative is about.
Okay, so lines 25 and 26 are estimates of energy efficiency upgrade costs. So, the number in the area, so the number here that you see, that's this 2 million and the 1.5 million is the area of the buildings that are included in the ordinance, and so you can see that up here.
So, this is the commercial and this is the government. And then, these numbers here, this 0.27 is the unit cost of energy upgrades on a per square foot basis. Again, this is estimated, and we cite the source, and you'll be able to see that when you're working in the tab.
And so, but you may have more local estimates for this, and you can update that. But hopefully that will suffice for a sort of this sort of background calculation as you're trying to consider whether you want to do this initiative or not. Okay, so I'm gonna take a quick pause, does anybody have any questions so far?
Okay? All right, well, I'm gonna keep going. Oops, all right. Looks like we already did this. Okay, so for the next part, we're gonna look at the benefits section. So, lines 30 and 31 are calculated energy savings or the annual estimated avoided energy costs for government owned buildings.
Unit costs have been extrapolated on a per building basis. So again, you can see the number of commercial buildings and the number of government owned buildings we've estimated, and then the estimated unit cost of energy savings. All of these are annual, and so, and even these calculated benefits, this is all annual.
It's the same on every tab, and then we factor in that sort of the time value and the discount rates later on in this section at the bottom. So in line 33, I'm sorry, that's meant to be 32. I think this area was a little bit off here.
So, line 32 is talking about the increase in property value. So here, we're assuming there's gonna be an increase in property value because of the energy efficiency updates. Now, because it costs less to run, and so people in theory would be more interested in purchasing that property. So again, these are estimates that we're obtaining from sources, and you can double-check them and see what you're comfortable with.
But, we've provided a baseline for you to use. So, Look, let me see if I can, yep, okay. So, The final piece, I guess I should explain these compliance violation fines as well. So, with an ordinance such as an energy building disclosure ordinance, the local government can set non-compliance fines.
And so, here we've estimated that find to be $500, you could change that based on what you feel like your fine might be. We're estimating that you might get 13 a year, and so these benefits would go to the local government annually. Now, I wanna talk about the social cost of carbon benefits.
So in this area, we list the estimated annual carbon reductions that would be achieved through the initiatives. So for calculating the social cost of carbon, you'll need to use at least a clear path tool, at least for this initiative. It does vary from initiative to initiative, we may be able to help with that if you don't already have access to Ackley in their clear path tool.
But, we encourage you to join early either way, it's a great resource. So, the number that we've entered here was calculated using the 4,125,000 total square feet. Which assumes that that adds the 2,625,000 in commercial square feet and the 1.5 million in government own square feet, and so that's how we get that.
I put my mouse on the screen here, so that's how you're getting this 4.125 million square feet total. And so, then we multiply that by that I'm sorry, let me enter that into the equity software to get the 348.29 social cost. So, that would be the metric tons of greenhouse gases that would be reduced as a result of this initiative annually.
So again, this is a confusing part, we can help you with it if you have questions. But really, what this number is, is really just the expected greenhouse gas reduction in metric tons that you expect from this initiative. And so, we've tried to pre-populate that for you on each of the tabs, and you may want to update it yourself based on what you know about the initiative.
So, this is a good time for me to stress that you're gonna need to update every single white cell in the spreadsheet. So, this is a good example, right? Because we have entered this indirectly clear path software ourselves. And so, you will definitely need to update this based on the expected square footage of buildings that you have in your community.
So, this one is not a default, and nor is any white cell, so you really need to go through every white cell and update it before you look at the total costs and benefits. Okay.
>> Can I ask a question?
>> Yes, please.
>> I'm not familiar with the clear path tool that you're referring to, but I am familiar in general with a lot of carbon footprint stuff and such and that seems like an insanely low number.
>> In other words, if I'm gonna actually get building efficiencies that you were talking about. 20% to 50%, or anything like that on 85 buildings 4 million square feet. I'm gonna say a heck of a lot more than 340 metric tons, right?
>> We presume that.
And then even at a $42 value, this comes out to be almost negligible, versus the other benefits you report up above, for example, 9 million, 1.6 million, 220,000. Then you bring in the social cost of carbon, which many of us are interested in. It's like.
>> Yeah, thank you for pointing that out.
You're absolutely right. That is a very low number, now that I stand back from it. We'll look into that and see what's going on there. Thank you for pointing that out.
>> Okay, thanks.
>> Yeah, yeah. These are complicated analyses with lots of numbers, and it's easy to miss little things.
And we've double checked everything as much as possible, but there's always gonna be things we don't see. So thank you, Kevin, for speaking up. I appreciate that. And any other questions?
>> In the chat, if that is a per building reduction possibly.
>> That might be, let's see.
Let me see if I can take a quick look at the calculation. Yeah, well, that might be what it is. And we might need to just update the multiplication in there to reflect that. We'll definitely look into this. So thank you all so much. This is great. See, I'm learning things from you.
You guys are learning things for me. This is great. Okay, all right, anything else? All right, okay, so now we're gonna look at the total costs, and the total benefit-cost ratio. So here's where we'll use all the information from above to calculate the costs and benefits for the local government budget, and for the community.
No costs or benefits are included in both columns. If you are familiar with Excel, you can click on the cell to see which is included in each calculation is normal. Generally, local government costs and benefits are determined based on what would come from and return to that existing budget of the local government, or the community.
So the social cost of carbon benefits are attributed to local government when the local government would be the entity paying for the implementation of the initiative. In this example, the compliance violation fees are coming to the local government is another example. Community costs and benefits, on the other hand, are determined.
I guess I should say community costs benefits again are determined based on what would come from, and return to funding outside of the local government's control. So for example, some costs may come from community members paying fees, apart from the taxes they pay from local government. We'll set that aside.
But for this initiative, for example, the increase in property values attributed to the community. But again, social cost of carbon benefits are attributed to the community only when the community would be the entity paying for the implementation of the initiative. All costs and benefits that occur over the timeframe in the initiative are multiplied by the present worth factor.
If they're a one time cost or benefit, they're still included in the total cost and benefits. But they're not multiplied by the present worth factors, since they're just a one time cost. So for this initiative, we can start to tell how to interpret this net benefits in the benefit-cost ratio.
So here's how to interpret those things. So the net benefit subtracts the cost from the benefits. So a net benefit greater than 0 is preferred. So this output provides an absolute measure of benefits, rather than the relative measure provided by the benefit-cost ratio. So the net benefit calculation answers the question, where can we make the biggest difference?
Now, the benefit-cost ratio, we want one that is greater than 1. And that indicates that the benefits are outweighing the costs. So maybe you're okay with the financial costs being greater than the financial benefits, because we all know that there's a lot of other social costs we need to consider.
So in that case, the benefit-cost ratio of 0.75 is gonna be better than a benefit-cost ratio of 0.5. So if you're trying to compare different initiatives to see which one you should do, you can take that into account. The benefit-cost ratio answers the question where is the biggest bang for the buck?
So assuming that two initiatives have the same total benefits, then the initiative that should be chosen is the one that minimizes total costs, or as the one that's most cost effective. All right, I should stop there. Any questions on that?
>> Andrea, there was one more question that came in through the chat, asking why there's a $22,000 per building assumption, and not a per square foot assumption, when looking on that page?
I'm asking if different sized buildings would save different amounts.
>> I'm guessing the answer to that is that, I mean, I can definitely see the rationale to what you're proposing. And that's probably more accurate way to go about it. But I'm guessing the reason why we did it that way is because the source we found estimated sort of the average energy savings per building.
So it's probably not super accurate, and it really is gonna vary a lot. You could update that for your own initiative, or if you happen to come across a resource that's gonna give you a per square foot. Or give us all a per square foot energy reduction estimate or average that has been experienced across the US, or across Indiana.
We could update that. For now, that's what we have probably just based on the source that we found. Any other questions? All right, okay, great. Well, so before we get into our breakout sessions, I wanna just talk about what's in development for the next iteration. So you guys have already brought up a couple things that we'll update for next time.
We have several initiatives, solar, doing LED streetlight retrofits, complete street initiatives, expanding EB charging infrastructure, and several more. Some other updates we wanna make to the entire set of spreadsheets is to account for the increase in cost of energy. So right now, all of our spreadsheets just assume that the cost of electricity and natural gas is gonna stay the same over time.
It doesn't actually account for the increase in cost of energy, so we wanna integrate that. We're gonna update the social cost of carbon to be the most recent version available. And we might make a couple of formatting upgrades too. So as you're going through these spreadsheets, if you find anything else, we definitely wanna know.
You can email us at firstname.lastname@example.org. Do we have more questions coming in Steve?
>> We have one comment from Lauren Travis that says a great list of initiatives for the expanded version. And that they would also be interested in building electrification.
>> Interesting, okay, great. Well, yeah, we want the initiatives that we include in the workbook to really reflect, what are the most common initiatives taking place and where do you get kind of the biggest greenhouse gas reductions from those specific initiatives.
Because those are the types of initiatives we want to see happening because there is this huge challenge right now to reduce greenhouse gas emissions as soon as possible. So we definitely will take suggestions on other initiatives you'd like for us to consider. When we we did work with cities in Indiana to suggest initiatives that we could include and we got, I think 120 suggestions, so we're slowly working through them.
Some of them are duplicates, of course, but we will certainly take more suggestions.
>> We got another coming, sorry?
>> Sorry can I ask a question?
>> Yeah, please.
>> Could you speak more to the upcoming solar initiatives workbook? Would that be focused on policy changes or just adding solar to municipal buildings?
>> So we're considering three different solar tabs. One would be for local government wanting to add solar to their buildings on site. Another one would be focused on a solarized program. There's a lot of communities in Indiana that are working with solarized communities. And then the third one is escaping me right now.
Steve or anybody-
>> It's multifamily housing solar
>> Thank you Tori yeah.
>> So multi family housing solar, so placing solar panels on multifamily, lowering typically low income residences. All right, we can take a couple more questions before we do breakouts. Okay, all right, well, if there are no more questions, we can head over to our breakout groups.