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TROI

Transition ROI Calculator

1. Identity

Loading identity…

Depends on module:

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2. Purpose

MEID_CALC_TRANSITION_ROI computes climate transition efficiency and ROI metrics by combining:

• Project cost profiles (CapEx/OpEx, optionally time-phased), sourced from:
  • MEID_ACCT_CRAWLER outputs, or
  • manual client input (same schema)
• Emissions reduction / impact profiles (expected and/or realized)

Primary outputs include:

• CapEx per tCO₂e reduced
• OpEx per tCO₂e reduced
• Total cost per tCO₂e reduced
• Abatement cost (€/tCO₂e) under defined horizons
• Optional finance metrics: NPV, IRR, Payback (if cashflow + discount rate provided)

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3. Non-Goals

This engine does NOT:

• validate whether projects qualify as “green”
• infer emissions reductions without an explicit impact profile
• replace formal corporate finance models
• determine EU Taxonomy alignment

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4. Inputs

4.1. Project Cost Profile (required)

Accepted from accounting crawler or manual input.

project-cost-profile.jsonGitHub ↗

{
  "transition_project_id": "ZYZ-DECARB-2026-001",
  "tenant_id": "TENANT_X",
  "entity_id": "Entity_A",

  "reporting_year": 2026,
  "currency": "EUR",

  "capex_total": 48250000,
  "opex_total": 9100000,

  "cashflow_timeline": [
    { "period": "2026-01", "capex": 1200000, "opex": 100000 },
    { "period": "2026-02", "capex": 900000, "opex": 80000 }
  ],

  "cost_categories": [
    { "category": "equipment", "amount": 38000000 },
    { "category": "installation", "amount": 6500000 },
    { "category": "consulting", "amount": 2500000 }
  ],

  "reconciliation_status": "passed_with_warnings",
  "integrity_flags": [],

  "ledger_refs": [
    {
      "source_system": "SAP_S4",
      "source_reference": "1900001:1",
      "gl_account": "1500",
      "posting_date": "2026-03-01",
      "amount": 1250000,
      "currency": "EUR"
    }
  ],

  "source": {
    "source_system": "SAP_S4",
    "job_id": "JOB-UUID",
    "extracted_at": "2026-02-16T00:00:00.000Z"
  }
}

Notes:

• cashflow_timeline is optional; if absent, the engine assumes totals occur in the reporting year (configurable).
• reconciliation_status="manual" allowed when user inputs costs directly.

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4.2. Emissions Reduction / Impact Profile (required for €/tCO₂e)

impact-profile.jsonGitHub ↗

{
  "transition_project_id": "ZYZ-DECARB-2026-001",
  "impact_basis": "expected",
  "time_horizon_years": 10,
  "baseline_method_ref": null,

  "reduction_tco2e_total": 120000,
  "reduction_tco2e_annual": [
    { "year": 2026, "tco2e": 12000 },
    { "year": 2027, "tco2e": 12000 }
  ],

  "scope_coverage": ["scope1", "scope2"],
  "material_scope3_categories": [],

  "confidence": "high",
  "uncertainty": {
    "distribution": "triangular",
    "p10": 90000,
    "p50": 120000,
    "p90": 150000
  },

  "source": {
    "source_type": "transition_plan",
    "source_ref": null,
    "measured_at": null
  }
}

Rules:

• Engine will not compute €/tCO₂e without reduction_tco2e_total > 0.

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4.3. Optional Finance Parameters (for NPV/IRR/Payback)

finance-parameters.jsonGitHub ↗

{
  "discount_rate": 0.08,
  "analysis_horizon_years": 10,
  "carbon_price_eur_per_tco2e": 0,
  "benefits_cashflow_timeline": [
    { "year": 2026, "amount": 0 }
  ]
}

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5. Core Calculations

5.1. Cost per tCO₂e (expected/realized)

Let:

• $C_{\text{capex}}$ = capex_total (or discounted sum if timeline given + discount_rate)
• $C_{\text{opex}}$ = opex_total (same)
• $R$ = reduction_tco2e_total over horizon

If cashflow_timeline is provided and a discount rate $r$ is supplied, the engine MUST compute present values:

• $C_{\text{capex,PV}} = PV(\text{CapEx cashflows})$
• $C_{\text{opex,PV}} = PV(\text{OpEx cashflows})$

and use PV-based costs for discounted €/tCO₂e outputs. If no timeline is provided, costs are treated as occurring at (t=0) (policy default).

Compute:

• $\text{capex\_per\_tCO}_2\text{e} = \frac{C_{\text{capex}}}{R}$
• $\text{opex\_per\_tCO}_2\text{e} = \frac{C_{\text{opex}}}{R}$
• $\text{total\_cost\_per\_tCO}_2\text{e} = \frac{C_{\text{capex}} + C_{\text{opex}}}{R}$

5.2. Abatement Cost (€/tCO₂e)

If benefits_cashflow_timeline provided, compute net cost:

• $\text{Net Cost} = PV(\text{Costs}) - PV(\text{Benefits})$
• $\text{Abatement Cost} = \frac{\text{Net Cost}}{R}$

Present Value Formula

$PV(X) = \sum_{t=0}^{T} \frac{X_t}{(1 + r)^t}$

Where:

• $X_t$ = cash flow at time t
• $r$ = discount rate
• $T$ = analysis horizon

5.3. NPV / IRR / Payback (optional)

• NPV uses net cashflows over horizon.
• IRR only computed if sign change exists in net cashflow series.
• Payback = first year cumulative net cashflow ≥ 0.

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6. Validation Rules (deterministic)

• If missing transition_project_id in either profile → reject.
  • PV = totals at t=0 (and add flag PV_ASSUMED_T0)
• If R <= 0 → output €/tCO₂e metrics as null and emit MISSING_OR_ZERO_REDUCTION.
• If currency mismatch across cost profiles in same request → reject unless fx conversion ref provided.
• If reconciliation_status="failed" → compute but emit warning flag COSTS_UNRECONCILED.

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7. Outputs

7.1. Project ROI Metrics (per project)

project-roi-metrics.jsonGitHub ↗

{
  "transition_project_id": "ZYZ-DECARB-2026-001",
  "impact_basis": "expected",
  "time_horizon_years": 10,
  "currency": "EUR",

  "capex_total": 48250000,
  "opex_total": 9100000,
  "total_cost": 57350000,

  "capex_pv": 44580000,
  "opex_pv": 8200000,
  "total_cost_pv": 52780000,

  "reduction_tco2e_total": 120000,

  "capex_per_tco2e": 402.08,
  "opex_per_tco2e": 75.83,
  "total_cost_per_tco2e": 477.91,

  "abatement_cost": 390.00,
  "npv": 12000000,
  "irr": 0.14,
  "payback_years": 6,

  "group_keys": {
    "business_unit": "Manufacturing",
    "geography": "EU"
  },

  "provenance": {
    "cost_profile_ref": "ZAR:artifact:transition_project_cost_profile@...",
    "impact_profile_ref": "ZAR:artifact:project_emissions_reduction_profile@...",
    "ruleset_ref": "ZAR:ruleset:transition_roi_policy@...",
    "job_id": "JOB-UUID"
  },

  "flags": ["COSTS_UNRECONCILED"]
}

7.2 Engine-level summary

• totals / medians / percentiles (useful for dashboards)
• output both nominal and PV metrics

Signals (optional): When mode="signal", the engine may emit ranked outputs and flags such as:

• top/bottom projects by €/tCO₂e
• outliers (e.g., extremely high €/tCO₂e)
• projects with reconciliation_status="failed" or confidence="low"

7.3 Portfolio Rollups (v1)

The engine MUST support optional portfolio rollups across projects to produce board/CFO-ready metrics.

portfolio-rollup.jsonGitHub ↗

{
  "rollup_key": "business_unit",
  "rollup_value": "Manufacturing",
  "project_count": 12,
  "total_capex": 180000000,
  "total_opex": 35000000,
  "total_reduction_tco2e": 420000,
  "portfolio_total_cost_per_tco2e": 511.90,
  "flags": []
}

Rollup inputs

• group_by: list of keys (e.g., ["business_unit", "geography", "program"])
• rollup_weighting: one of by_tco2e | by_cost | unweighted

Rollup calculations For each rollup group (g):

• $C_g = \sum_{i \in g} (C_{\text{capex},i} + C_{\text{opex},i})$
• $R_g = \sum_{i \in g} R_i$

Portfolio cost per tCO₂e:

$$\text{portfolio\_total\_cost\_per\_tCO}_2\text{e}_g = \frac{C_g}{R_g}$$

The engine MUST also output project_count, total_capex, total_opex, and total_reduction_tco2e per rollup group.

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8. Provenance & Audit Trail

Outputs must include:

• references to input artifacts (ledger refs, reconciliation report refs)
• ruleset refs (if any)
• calculation parameters (discount rate, horizon)
• timestamp + job id

This ensures re-computation reproducibility.

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9. API Contract (request)

api-contract.jsonGitHub ↗

{
  "mode": "calculation",
  "reporting_currency": "EUR",
  "calculation_params": {
    "discount_rate": 0.08,
    "analysis_horizon_years": 10,
    "pv_method": "discrete_monthly",
    "rollup_weighting": "by_tco2e"
  },
  "rollups": {
    "group_by": ["business_unit", "geography"]
  },
  "projects": [
    {
      "cost_profile": { },
      "impact_profile": { },
      "finance_params": { }
    }
  ]
}

Response:

• array of per-project ROI metrics + optional summary.

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10. Integration Notes

• Primary upstream source: MEID_ACCT_CRAWLER → transition_project_cost_profile
• Alternative source: manual input from Input Hub
• Downstream consumers:
  • ESRS E1-1 financial linkage reporting
  • Transition plan dashboards
  • Ranking engine (best €/tCO₂e initiatives)
  • Monte Carlo scenario engines (cost uncertainty extensions)

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