Intro to Carbon Offset Credits & Carbon Trading
International regulators, federal and local governments, and global trade commissions are taking carbon dioxide and other Green House Gas (GHG) emissions more seriously every year. A recent Canadian example occurred on December 2009 at the global climate change talks in Copenhagen. Canada, in the presence of the UN agreed to an emissions reduction target of 17% from 2005 levels by 2020. This reduction would occur in the form of creating carbon taxes, rewarding companies for CO2 and GHG emissions, and encouraging a market for carbon credits.
Globally, federal governments are taking similar stands against GHG emissions and the organizations that create them. Many GHG producing organizations simply have no way of significantly reducing their emissions in a short period of time. These emissions are becoming visible on the balance sheet as a cost of doing business. The best example is to imagine a factory that emits 15,000 tonnes/year of CO2. Through legislation however, the quota for that factory is only 10,000 tonne/year. The factory must either reduce their emissions or purchase offset credits equal to 5,000 tonnes of CO2. This process is called “cap and trade”, with a cap being placed on the amount of CO2 emissions, and a trade occurring in order to make up for the surplus. Cap and trade becomes like any other business decision, weighing out the costs associated with capital improvements versus simply purchasing the credits.
On the other side of the market there are organizations that are considered to be carbon negative. They either have technologies that sequester carbon or produce carbon at a significantly lower rate than other companies creating a similar product (eg. Energy). These organizations have an opportunity to sell the credits created from their negative carbon existence, thus allowing a carbon positive company the opportunity to neutralize their impact. The idea gets really exciting when you think about the fact that a profitable business could be created around removing GHG’s from the atmosphere and selling the credits to the companies that place them there. Also, this encourages the creation of alternative, clean energy sources that receive credits based on production of energy without emissions.
As a result, the carbon market is experiencing faster growth than the steel market during the Industrial Revolution. This growth represents an opportunity for organizations that can quickly and easily identify the amount of carbon offset credit that any given carbon negative company is creating (see the advanced carbon trading post for more details). One of GreenAngel Energy’s investee companies, Habitat Carbon Assets, is doing just that. They have developed a cloud-based software platform that measures carbon offsets. Habitat also helps in brokering the trade of these credits, earning substantial commissions.