Integrating carbon and cost estimation

In order to realise the UK government’s net-zero ambitions, cost and carbon must be estimated as part of the same process, the Environment Agency advocates


  • Dr Katherine Ibbotson

28 October 2020

Assessing the carbon cost of construction projects involves combining the skillsets of cost estimation and whole-life carbon quantification. Traditionally, these disciplines have been isolated from each other despite the Infrastructure Carbon Review of 2013, which identified links between reducing carbon and lowering costs. Yet cost and carbon must be estimated as part of the same process to support a changing economy and to realise the UK government’s ambitions for achieving net-zero carbon emissions by 2050.

This means that carbon output for capital, whole life and offsetting activities needs to be estimated. It is vital to understand where the mutual benefits of low carbon and reduced cost can be achieved, where the tipping point for low-carbon, higher-cost options occurs, and how this tipping point can be avoided.

"It is vital to understand where the mutual benefits of low carbon and reduced cost can be achieved"

The Environment Agency approach

As a client organisation, the Environment Agency (EA) has incorporated a specific cost and carbon estimating (CCE) role within its wider cost and carbon team. CCEs should have the skills and capabilities to produce estimates for whole life cost and carbon, for all stages and options taken forward as part of the UK government’s Five Case Model. This involves combining cost estimation approaches – such as top-down analogous estimating, parametric estimating, asset assemblies, and detailed bottom-up estimates – with the ability to quantify whole-life carbon. CCEs must be able to understand and communicate the impact of carbon in relation to cost estimates produced while using the EA’s internal cost and carbon accounting systems.

Carbon is quantified using a cradle-to-grave methodology, following the guidance in PAS 2080: Carbon Management in Infrastructure, specifically modules A1 to C4. Module B9 – Users utilisation of infrastructure – is not as pronounced for EA assets as it is for other infrastructure clients.

This quantification should be undertaken over a 10-year reference study period, up to a maximum determined by the asset life cycle. In the asset standard for EA assets this defaults to a 100-year life.

Client-set target costs are an essential part of the EA’s collaboration with its partners. The EA provides estimates for how much a project stage or asset type should reasonably cost, across a wide range of likely options, based on analytical techniques applied to robust, internal actual cost data and industry benchmarks.

The quantification of the client-set target cost is developed by the client in collaboration with the supply chain, comprising of a thorough review of the contractors plan to identify and eliminate inefficiencies, uneconomical activities or practices. The resulting figure is the should-cost estimate, which informs the client assessment and becomes the client-set target cost at full business case.

Everyone in a project team, whether a client, designer, contractor or estimator, has a role to play in supporting an evidence-based should-cost estimate. The carbon alignment is currently operated as a separate system, with the use of the organisation’s project cost tool and 'Eric' carbon planning tool aligning from a top down perspective. The transition to a new, more granular system and a single function is a significant step forward.

Challenges and risks

Aligning cost and carbon into one function presents risks and challenges, with organisations’ tools, systems and approaches needing to focus on both factors collectively. Culture and behaviours, both internal and external, need to be appropriately supported, with cost and carbon data aligned into a single system that provides a reliable, repeatable and robust approach. This system must also support the organisation’s standards and data requirements.

The EA is mitigating these risks and challenges through the implementation of its Carbon Cost Tool (CCT). The tool is designed to integrate calculation of estimates for both carbon and cost over the life of assets and projects in the agency’s capital programme, and to provide estimates for client-led target cost setting.

This allows the EA to become a more intelligent client – supporting its commercial arrangements and providing opportunities to understand, and manage, its carbon impact better – by supporting the business and its supply chain in lowering carbon. The EA’s Creating Asset Management Capability programme in turn supports CCT by improving the way data is categorised and maintained.

The automation and continual improvement of CCT, along with the maturity of the EA’s master cost and carbon rates library, will be enabled by the internal carbon and cost team, who provide an estimating and commercial intelligence service to:
  • influence and inform decision-making
  • evidence and support carbon and cost quantification
  • provide sound methodology
  • provide whole-life estimates
  • assure client-set targets for contracts.
The EA is committed to evidencing carbon and cost quantification to achieve net-zero emissions and support project-level decision-making. This means providing robust estimates, data validation and assurance, and benchmarking, analysis and collaboration with its supply chain, wider industry and academia. Through the use of a consistent, repeatable estimation formulae, the EA can align with emerging industry standards, BIM requirements, and improved digital approaches.

With a client organisation such as the EA requesting specific skills and capabilities in cost and carbon estimation for its work, the question is whether cost-estimating roles are fit for the future. In practice, the length and breadth of estimators’ experience falls into either the carbon or cost category, so a fusion of the two is required as we transition to a zero-carbon economy.

"The EA is committed to evidencing carbon and cost quantification to achieve net-zero emissions and support project-level decision-making”

Related competencies include: Sustainability

RICS response

RICS has begun work with the ICMS coalition in developing an extension to ICMS to include carbon reporting, with publication expected in 2021. Since ICMS is already recognised as the only international standard in construction cost reporting, this further work will confirm a symbiotic connection between construction cost and carbon reporting. In addition, later this year RICS will publish the Global Professional Statement in Cost Prediction which signposts best practice in cost estimating, cost planning and cost reporting globally.

You can find out more about either project from Alan Muse, Global director of the built environment at RICS.

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