Prospect for Carbon Credit Prices
Thursday, November 24, 2011
Carbon credit prices are set to rise from the beginning of the third phase of the EU's Emissions Trading scheme if, as expected, parties are obliged to buy their full quotas via auction, rather than the current system of free allocation. There is also talk of a baseline being implemented for carbon credit prices, fixing a minimum price, in the fight to reach the 2020 target of 5.2% lower emissions on 1990 levels.
The Emissions Trading Scheme has come in for criticism for not effectively enough fulfilling its purpose of resulting in true reduction in emissions from heavy polluters across the EU. Phase one of the EU ETS ran from 2005 to 2008. Polluters were given a carbon quota with one credit representing one ton of carbon emissions, or its equivalent in other greenhouse gases. Emissions to the equivalent of one ton of one ton of carbon meant one carbon credit had to be retired, with the number of credits allocated to the particular emitter, being their ceiling for emissions over the three year period. In the event that an emitter used up their allowance of carbon credits, they would have to buy additional credits from either other emitters with a surplus, or carbon reducing projects allocated with carbon offsets. The idea was that this carbon trade would put a monetary cost on emissions above the allowed level, and pay for the offsetting of these emissions elsewhere, creating an overall gradual reduction in global greenhouse gas emissions.
The criticism of phase one, and two a lesser extent the current phase two, where the carbon credit allowance runs from 2008 to 2012, is that emitters were handed allowances large enough that there was a carbon credit surplus and no real reduction in emissions took place. In reality, carbon allowances were such that emissions actually rose slightly over phase one. Phase two has seen a slight reduction, but emission levels are still around the 2005 baseline. Proponents of the scheme argue that phase one can be considered an implementation period where emitters were essentially trained in the carbon credit system and its mechanics while giving them time to plan for more stringent emission quotas. Phase two has seen carbon credit quotas reduced and emitters beginning to tighten their belts in terms of emissions.
Phase three is where things really kick in. The industries and emitters covered by the scheme will be widened. One prominent example of this widening reach of industries which will come under the carbon credit system, is the airline industry. Also, whereas in phase one and phase two, initial carbon quotas were allocated, not paid for, it is mooted that in phase three the overall carbon credit pool will be auctioned off, with polluters bidding for the level of emissions they will be entitled to make. Between 2013 and 2020, the overall pool will be reduced by 1.75% annually, with the aim of hitting a 21% reduction on the 2005 emissions baseline for EU emissions, by 2020.
Whether or not some reduced degree of allocation will remain, or whether a full auction system will be implemented, carbon credit prices will almost certainly rise as reduced quotas invert the supply and demand ratio which has so far existed in the more lenient first and second phases.
The balance between establishing a higher market-based carbon price, and not making EU exports uncompetitive due to the additional cost burden compared to regions without a carbon cap, or a less strict one, will be delicate. With the EU fully committed to the EU ETS system it will have to be found if the carbon system is to be justified as a truly effective means to reducing global emission levels.
With the EU fully committed to the EU ETS system it will have to be found if the carbon credit system is to be justified as a truly effective means to reducing global emission levels. More details about carbon credits you may find on carbon-investments.co.uk
New Carbon Credit Program Can Benefit Infrastructures in Developing Countries
Friday, November 18, 2011
The United Nations recently achieved a new milestone in its innovative environmental policy by approving a New Delhi metro system for carbon credit issuance. The metro in the capital of India was first launched in 2002. According to the UN, during its nine-year run, it has contributed to the annual reduction of 630,000 tons of greenhouse gas emissions in the city with 14 million residents.
The passenger rail system, which runs partly underground and party on elevated tracks, is one of the most successful public transportation projects carried out by the Indian government to date. It is estimated that, thanks to the metro, about 90,000 carbon-emitting vehicle trips are kept off the roads.
The rail system is able to achieve its emission reductions by employing an innovative regenerative braking technology, which cuts energy use by almost 30 per cent. Over the next seven years, the new UN carbon credit program will earn $9.5 million for the New Delhi metro. The initiative is part of the UN goal to encourage developing countries to invest funds in transportation networks, which help reduce greenhouse gas emission.
"No other Metro in the world could get the carbon credit because of the very stringent requirement to provide conclusive documentary proof of reduction in emissions," according to the official statement issued by the UN. The international organisation further claims that each passenger, who, instead of jumping into their car or on the bus, chooses to hop on the metro, can help save about 100gm of carbon dioxide for every trip of 10km.
In addition to being environmentally friendly, subways have been the most commuter-friendly means for public transportation in metropolitan cities for years. In Tokyo, for example, more than 3.1 billion people use the metro system each year. In New York City, that number is over 1.6 billion, and in London, 1.1 billion take advantage of the convenient tube network annually. The more the passengers, who opt for the metro, the higher the amount of GHG emissions that are being prevented from entering into the atmosphere.
Typically running underground, metros are a time-saving alternative to buses and on-road rail cars, which, just like regular vehicles, often fall victims of grueling morning and after-work traffic. Underground rail systems, on the other hand, run independent of traffic jams caused by long waits at traffic lights and, in some cases, car accidents. Being underground, their operation is also relatively unaffected by severe weather conditions such as snowstorms and heavy rains, which can seriously impair above-ground traffic.
Metro systems are probably the most expensive transportation systems to build and maintain. As a result, many developing countries are falling behind in establishing solid underground rail infrastructure. According to Dr. Jean-Paul Rodrigue, professor at the Department of Economics and Geography at Hofstra University, only about 80 large urban agglomerations have built a subway system, and the majority of them are located in developed countries.
Recognising metro systems for their capacity to keep city environments clean and city roads less congested, and rewarding them accordingly, can benefit local economies and commuters alike. Financial incentives such as carbon credit issuance can make it possible for governments to build additional tracks and expand the underground infrastructure in places where such tracks wouldn't be financially viable in the absence of a carbon credit incentive. It will also encourage innovation in the area of transportation, while cost effectiveness and energy efficiency climb up on the list of priorities.
But the responsibility should not fall exclusively on the international community to make financial incentives available. It is ultimately up to the metro systems to take responsibility in proving their effectiveness in GHG emission reductions, so that they can qualify for carbon credits. As the UN points out in their statement, only the New Delhi system has so far provided documented proof of its energy efficiency. Local governments have to establish verification entities, which monitor and report emission reductions by their metro systems. The process can take time and resources, but the benefits should potentially outweigh the expenditure.
Local governments and international bodies such as the UN need to show equal commitment in keeping the air clean from polluting vehicles while developing eco- and commuter-friendly public transit systems. Only then can global warming and its potentially catastrophic effects can be stopped in their tracks. For further details on carbon credit please visit http://www.carbon-investments.co.uk/
Labels: Benefit, Carbon, Countries, Credit, Developing, Infrastructures, Program
Carbon Credits - What Are They And How Are They Used?
Tuesday, November 8, 2011
One carbon credit is equivalent to one metric tonne of carbon dioxide. For every metric tonne of carbon dioxide you save you'll be granted a carbon credit. These are presented as certificates and can be sold off to other companies to help their own profit margin. This incentive for businesses makes them more likely to be motivated to lower emissions and it can help their bottom line.
As an example if you save 1000 tonnes of carbon dioxide by running your company more environmentally friendly you will be granted 1000 carbon credits. The 1000 carbon credits that you have just saved can them be sold off to other companies that have polluted over the limit. This will then help your bottom line and besides that show others that you have an eco friendly business.
There are namely two types of carbon credits that are given out, these are voluntary and mandatory. In the Voluntary offset market business can purchase carbon credits on a voluntary basis to lower their carbon footprint and the amount of carbon emissions that result from their activities. The voluntary market is used to fund environmental projects like planting trees or diverting methane gas from farms into electricity at the power plant.
Under the mandatory market governments and companies are required by law to emit greenhouse gases by purchasing carbon credits. Under this market there is a system called cap and trade which states if you're under polluting within a time frame you get to keep the carbon credits to sell to others. This aids them into choosing less intensive carbon activities and increasing their bottom line by selling off the extra credits they may receive from being environmentally friendly. This means that in the new age companies which produce the least amount of greenhouse gases are going to grow larger and thus help even more!
There is another type of offset and it's called 'Renewable Energy Credits'. Renewable energy credits which are also known as 'RECs' support specific renewable energy such as wind and solar power. The main advantage of RECs is that they supply an amount of renewable energy into the market which can benefit many within the surrounding area.
In the end whether it's the voluntary or mandatory market carbon credits are used to let polluters pay for their activities while rewarding the eco companies. These both encourage the reduction of fossil fuels in the atmosphere and the need to contribute and be rewarded for it at the same time. It's a scheme which has grown pretty rapidly over the past few years and should continue to do so. You can invest by choosing companies like select global which is a leading carbon broker-dealer to help you capitalize on this opportunity.
Can Carbon Credit Deal Help Bank of America's Tarnished Image?
Sunday, November 6, 2011
The last few months have been unfortunate, to say the least, for Bank of America Merrill Lynch. The U.S. financial giant has come under fire on more than one front -- from lawsuits, to a downgrade in ratings, to falling stocks and dissatisfied customers. Amid corporate image woes, the company announced this week a groundbreaking multi-million dollar carbon credit deal with California-based TerraPass Inc.
It seems like Bank of America has every reason to look for ways to mend its damaged name and to reposition itself on the global commodities market. The announcement of the carbon credit agreement, then, should not come as a surprise. Through the bold and innovative move, one of the world's largest financial institutions is vying to become a leader in carbon credit trade in California after the state implements its compliance carbon trading scheme in 2012.
Under the carbon credit agreement, Bank of America Merrill Lynch Global Commodities Group has an option to purchase and bring to market several million tons of California carbon offsets from TerraPass Inc. through 2020, which will be generated from a pool of agricultural methane projects located throughout the U.S. All of the company's agricultural methane projects follow regulations, which are compliant with California's Global Warming Solution's Act and its offset protocol.
Abyd Karmali, global head of Carbon Markets in the Global Commodities Group at Bank of America Merrill Lynch, said of the deal: "By acting as a first mover in California, we are positioning ourselves as the offset provider of choice for companies that will need to become compliant under these new regulations."
One has to wonder, is Bank of America's new green deal indicative of the company's genuine concern for the environment? Or it shows the company's progressive business thinking and investment savvy for entering a promising, yet untapped, niche market? Or maybe it is just a smart PR move?
Companies, who have tried to differentiate themselves and gain a competitive edge, are no strangers to using environmental sustainability, carbon offsetting and climate change as part of their marketing campaigns. With consumers and investors growing more and more eco-conscious, it seems like a smart business move to adopt a more sustainable business model. In this sense, Bank of America's agreement seems logical. And it can, indeed, help the company reinvent itself and achieve a stable position in an emerging niche market. This, in turn, will hopefully help the brand regain customer and shareholder trust.
Sustainable and ethical investments, such as entering emerging carbon credit markets, can benefit corporations in a few ways:
1. It highlights the business' commitment to sustainability and social responsibility, making it more appealing to current and prospective shareholders. As in the case of Bank of America, teaming up with TerraPass Inc. is a clear message that the company is adopting an innovative business model, which places current environmental issues at a higher priority when compared to traditional business models. In a time when "green" is in, sustainable practices certainly receive attention, and the right kind at that.
2. A company can gain a competitive advantage by differentiating itself, especially in client-oriented markets. Financial institutions today are facing a stiff competition. As customers are becoming more and more aware of their impact on the environment, by offering them the option to participate in the green economy, Bank of America is clearly trying to regain client attention, confidence and trust. For the same reason, Google decided to make publicly available its carbon footprint. The search engine company also stressed its commitment to alternative energy as a way of maintaining its carbon neutrality. And with the launch of Google+ a few months ago, a platform aimed at earning a chunk of the winning and highly competitive social networking market, Google is making all the right business moves to gain customers. Needless to say, clients will take notice of its green efforts.
3. It shows innovation and leadership. As Karmali himself said, it's a way of placing the company in a favourable pro-active position while others are still weighing in their options. Financial experts expect that the California's Global Warming Solution's Act will lead the way to the world's second largest carbon trading market after the European Union Emissions Trading Scheme. Bank of America is ready to take advantage of the untapped pot of gold. Its corporate leadership is showcasing not only creativity when it comes to investing, but also farsightedness -- a quality much-appreciated in the financial world.
As with any emerging market, the California compliance carbon credit market will take some time to generate momentum and return monetary rewards. Until then, Bank of America and other parties, which are optimistically placing their bets on carbon's promising future in the U.S., can enjoy the benefits of good press and public approval - both quite effective in diverting attention from corporate crises.
