IOOI analysis -based monetization

Introduction

Upright conducts IOOI (Input, Output, Outcome, Impact) based monetization with the following two-step process:

1. Impact pathway analysis: The IOOI (Input, Output, Outcome, Impact) framework is applied to scope relevant inputs and outputs, and their consequences as outcomes and impacts.

2. Monetization: Impacts are monetized using monetization factors corresponding to the impacts defined in the impact pathway analysis.

Example (GHG emissions)

We will demonstrate this monetization approach using harms caused by human-emitted carbon emissions as an example.

Figure 1 summarizes forms of carbon emissions along with their consequences using the structure provided by the IOOI framework.

Figure 1: Summary of the IOOI analysis conducted for costs related to GHG emissions

The monetization factor Upright uses for CO2 equivalent emissions is 417 USD per CO2 tonne, based on Ricke, K., Drouet, L., Caldeira, K. et al. Country-level social cost of carbon. Nature Clim Change 8, 895–900 (2018).

Background on the cost of carbon figure used by Upright

Upright has used the cost of 417 USD per CO2 tonne since 2018, when the Ricke et al. paper was published.

While there has been an abundance of new research published since that, it has not provided a compelling reason to update the figure, as the 417 USD figure falls well into the (published) margins of error of also newer mainstream research, or simply reflects a slight change in assumptions, such as discount rate (as in this article).

See references below for more information.

IOOI outputs vs impacts

In the IOOI framework, Carbon emissions — as well as several other commonly measured impacts — are considered "outputs" rather than "impacts".

Upright uses IOOI analysis to translate outputs — like emissions — and direct impacts — like Meaning & Joy — to a common class of impacts that can be monetized consistently.

References

• IPCC Sixth Assessment Report

• OECD: Effective Carbon Rates 2021

• OECD: Cost-Benefit Analysis and the Environment: Further Developments and Policy Use 2018

• Ricke, K., Drouet, L., Caldeira, K. et al. Country-level social cost of carbon. Nature Clim Change 8, 895–900 (2018)

• Carleton, Tamma and Greenstone, Michael, Updating the United States Government's Social Cost of Carbon (November 12, 2021). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2021-04

• Robert S. Pindyck, The social cost of carbon revisited, Journal of Environmental Economics and Management, Volume 94, 2019, Pages 140-160, ISSN 0095-0696

• Richard S.J. Tol, A social cost of carbon for (almost) every country, Energy Economics, Volume 83, 2019, Pages 555-566, ISSN 0140-9883

• Smith, S. and N. Braathen (2015), "Monetary Carbon Values in Policy Appraisal: An Overview of Current Practice and Key Issues", OECD Environment Working Papers, No. 92, OECD Publishing, Paris.

• Jarmo S Kikstra et al 2021 Environ. Res. Lett. 16 094037: The social cost of carbon dioxide under climate-economy feedbacks and temperature variability

• US: interagency working group (IWG) / Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide

• Brian C. Prest, Kevin Rennert, Richard G. Newell, and Jordan Wingenroth 2022: Social cost of carbon explorer

• Rennert, K., Errickson, F., Prest, B.C. et al. Comprehensive evidence implies a higher social cost of CO2. Nature 610, 687–692 (2022)