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Medium Profitability Micro-Economics Financing Project Selection

One Tree Hill

#Non Profits #Non-Profits #Environmental/Sustainability #Carbon Credits
ProHub Comment

This case tests a candidate's ability to conduct cost-benefit analysis under uncertainty while integrating qualitative factors. Strong candidates will identify the break-even carbon credit potential per tree (0.625) using unit economics rather than calculating all projects individually, then synthesize financial profitability with logistical, legal, and operational considerations to make a defensible recommendation.

Estimated Time 15 minutes
Difficulty Medium
Source ROSS
50 / 100
The nonprofit organization, One Tree Hill (OTH), has a mission of restoring forest cover globally. They typically give grants (donations) to local NGOs, communities, or startups that reforest (i.e., plant trees) in a given area. Due to the limited supply of grant funds in recent times, and in order to enter a very lucrative market, OTH is looking for ways to fund some reforestation projects through the sale of carbon credits (CC), also called “carbon financing”. They have a portfolio of projects in need of funding, and they would like to select a few for carbon financing. Should OTH pursue carbon financing, and if yes, for which projects?

Clarifying Information

  1. A carbon credit (CC) is a tradable certificate that provides the holder of the credit the right to emit greenhouse gases, typically 1 ton of carbon dioxide equivalents. Corporations and countries purchase carbon credits to “offset” their emissions above allowable limits.
  2. If the candidate asks about the process for selling carbon credits, show them the flowchart in Exhibit 1 (this is just meant to help them understand the process, candidate is not expected to draw insights from this)
  3. There is no target amount to be raised for funding these projects (there are many). The case is about whether financing a project via generating and selling carbon credits is a feasible option. If feasible, OTH will proceed with that project.
  4. The customers are typically the corporations or countries wanting to offset emissions from their operations.
  5. This is a forward-looking analysis, i.e., only for new projects. We can ignore any past planted trees or projects.