Whether you are a company that realises that modern consumers increasingly demand that the suppliers of the goods and services they buy are environmentally aware and responsible companies, an environmentally responsible individual or investor looking at sustainable markets, we are here to help you source the best service provider for you.
Carbon-investments.co.uk provides you easy access to and the ability to compare the most professional service providers and platforms in the carbon offsetting market.
Speak to some of the best carbon-reduction consultancies and carbon credit wholesalers. Find the company best able to help reduce your company’s direct carbon footprint and then help you to market your environmental responsibility to the maximum advantage of your brand. Alternatively, take matters into your own hands and buy or trade carbon credits via on of the major environmental exchanges.
Calculate your or your household’s carbon footprint and do your bit to prevent global warming by going carbon neutral today! Offsetting an environmentally friendly friend or loved-one’s carbon footprint could also be a great alternative gift.
If you are a private or institutional investor considering the possibility of either investing in a project producing carbon credits, or trading in carbon credits we list both investments projects and some of the most reputable carbon credit brokers and wholesalers. If you feel confident of trading via a carbon exchange directly, or want to monitor the market, we list the major exchanges where compliance and voluntary carbon credits are traded.
What are Carbon Credits?
In a nutshell, a carbon credit is the financial instrument, which represents one metric ton of carbon pollution, and carbon trading is the market-based trading system attributing a price to pollution, initiated by the Kyoto Protocol of 1997.
In order to succeed in keeping global temperature increase below 2 degrees centigrade, current climate science suggests that atmospheric CO2 concentrations need to peak below 450ppm. We are currently at 395ppm and rising faster than at any time in the past 400,000 years, at a rate of 2ppm each year.” This requires global emissions to peak in the next decade and decline to roughly 80% below 1990 levels by the year 2050 (Baer and Mastrandrea, 2006).
What changes hands in carbon trading is the right for industries to emit a certain volume of Co2, putting a price and cap on such emissions.
Carbon Credit Investments
Carbon investments, investment in carbon credits and investment or trading in the carbon market are beginning to become buzz-words in business and industry circles. Particularly over the past year both institutional and private investors have been gathering information and beginning to dabble in carbon investments.
Some of the larger investment banks such as JP Morgan, Morgan Stanley, Goldman Sachs and Barclays Capital, have established carbon trading departments and made carbon investments by both investing in companies in the market and through the ownership and spot-trading of carbon credits. As a developing market, there is still a degree of confusion over carbon investments and carbon offsetting from many companies and investors, which we will try to clarify here.
The European Union Emissions Trading Scheme (EU ETS)
Also known as the European Union Emissions Trading System, this is the largest multi-national carbon emissions trading scheme in the world and a major pillar of EU climate policy. The EU ETS carbon credit scheme currently covers more than 10,000 installations with a net heat excess of 20 MW in the energy and industrial sectors which are collectively responsible for close to half of the EU’s emissions of CO2 and 40% of its total greenhouse gas emissions.
The installations covered by the EU ETS are considered to be heavy polluters and are obliged to comply with the cap on emission levels set by the cap-and-trade system. They receive an initial allocation of carbon credits, equivalent to the limit set on their pollution levels by the system. If a particular installation manages to reduce its carbon emissions below their allocated cao then it has the opportunity to sell any surplus carbon credits on and gain take the revenue. This is envisaged to act as a financial stimulus to polluters to invest in carbon reduction technology and practices.
On the other side of the equation, any installation that does not succeed in reducing emission levels to those set by the cap imposed up them, must buy additional carbon credits to offset this additional pollution. They will do so either via a carbon exchange, which works in the same way as a stock exchange, or commodities exchange, or may also negotiate a direct OTC contract with a supplier, wholesaler or company with a surplus. This allows the carbon trading system to be more self contained and be part of the stock exchange with little government intervention.
These quotas are issued by NAPS (national allowance plans), and given out for a period of several years at once (a ‘trading period’), with a life-cycle of the given trading period by which point the carbon credits must be retired. There are proposed amendments that from the beginning of the system’s third trading period from 2013 should see a centralised EU administrative body replace the current national structures.
Kyoto-CERs (Certified Emissions Reduction)
As of 2008-9 the EU’s decision to accept Kyoto ratified CER’s carbon credits as equivalent to the EU ETS, has been fully integrated. It is now possible to trade EUA’s and UNFCCC (United Nations Framework Convention on Climate Change ) validated CERs on a one-to-one basis within the same carbon trading system, up to a certain percentage, which varies from country to country, but is usually something around a permitted 20% substitution of EUAs with CERs.
CER’s are produced by CDM (Clean Development Mechanism) projects. The CDM allows industrialized countries to invest in emission reductions wherever it is cheapest globally, and is supervised by the UNFCCC. CDM projects are predominantly located in South America, Asia and Africa, although their global presence is spreading. They are allocated to projects and practises which are verified as reducing total global carbon emissions and would not be financially viable without being part of the carbon trading system ie. offering additionality. An example of this might be an investment in technology to capture methane in a waste processing plant in Asia, which would not have otherwise been invested in other than due to the incentive that carbon credits equivalent to the emissions prevent could be verified and sold on the carbon trading markets. Another example might be a renewable energy project in a developing economy, which does not offer attractive feed-in tariffs and is a financially attractive investment only because of the potential to generate income from selling carbon credits equivalent to the emissions its existence prevents by substituting fossil fuel based energy production alternatives.
Industrialized countries, and companies located in the industrialised world then buy these CERs to offset the deficit between their allowance (of EU ETSs if the country is in the EU) and their Co2 output.
VERs (Voluntary/Verified Emissions Reductions)
VERS are carbon credits used by companies and individuals voluntarily offsetting their carbon footprint via the emerging market for carbon credit investments and carbon trading outside the Kyoto Protocol compliance regime. The voluntary market may at present be smaller and less liquid than the compliance market for carbon credits, however, general market opinion is that the wider scope of the voluntary market, and growth led by the private sector, not public policy, means that it has strong potential to outstrip the market size of the compliance regime.
Demand for VER carbon credits began gradually and intermittently, but there has been a shift in this market to more structured growth, facilitated greatly by the development of credible intermediaries such as the Bank of New York, which created a registry for VERs in June 2006, as well as the widespread acceptance of increasingly scientific quality standards such as the Voluntary Carbon Standard (VCS), designed by the International Emissions Trading Association (IETA), and non-profit organizations The Climate Group and WWF, as well as the Gold Standard and several others. VERs are now also traded via some of the major exchanges and held on registries such as Makrit, which has added much transparency and stability to the voluntary offset market.
There are three main drivers for demand in the voluntary market. Firstly, as a key component of a company’s marketing strategy, linked to corporate social responsibility. For example, many airlines and travel companies offer VER carbon credits to environmentally minded passengers as a voluntary addition to their ticket price, and increasingly build them into the initial price. Companies manufacturing products from toilet paper to sugar are increasingly incorporating their ‘carbon neutral’ or ‘low carbon’ credentials on their packaging and strongly associating this image with their brand. They make these claims usually on the basis of a combination of investing in technology and practices which make their product’s production and distribution more energy efficient, and through buying VER carbon credits.
Companies in industries which are considered to be potentially incorporated into compliance structures eventually, as all airlines operating within the EU were recently, sometime use carbon trading and offsetting in the voluntary market as a valuable learning exercise for future participation in the compliance regimes. They may wish to develop a competitive advantage through familiarity with carbon credit market mechanisms through trading and offsetting on the voluntary market.
Some institutional and private investors also buy VER carbon credits with the intention of it being a profit-making enterprise where financial participants build portfolios of VER carbon credits in order to speculate in this market through carbon trading.