What are Carbon Credits?
Emissions trading, which is also called cap and trade, has evolved as a means of reducing the amount of greenhouse gases released into the Earth's atmosphere utilizing a market based approach. Since many countries now have their own emission reduction targets to achieve, caps have been placed on industries on the amount of pollution they are allowed to release. This is issued in the form of permits. If they produce more than permitted they will either have to reduce their emissions themselves, which may involve considerable expense investing in technology and machinery to achieve this or they would have to source carbon credits to offset their emissions from a verified source.
The carbon credit is, therefore, the financial instrument that represents one metric ton of pollution and this system of trading creates a financial incentive to comply. An example of this would be a business with a factory that typically produces 10,000 tons of CO2 per annum with a cap imposed permitting them only 5,000 tons in emissions.
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They may be in a position where the best way for them to comply would be to purchase 5,000 carbon credits to offset their own polluting rather than incur the expense of trying to reduce their own emissions.
The credits are created by any entity that has developed a technology that is internationally recognised as having actively reduced, stored or avoided (also called sequestration) a measurable pollutant, i.e. one metric ton. This could be anything from wind farms, solar energy, methane capture, forestry projects, bio fuels, etc., which assist in the global reduction of the various emissions in question. These are usually carbon dioxide, methane, hydro fluorocarbons (HFC's) and nitrous oxide and all industries are involved from agriculture, mining, chemicals, manufacturing, waste disposal, sewage and so on; the list is endless. All businesses produce greenhouse gases in varying forms and degrees and with the new laws in place the trading of carbon credits is already booming
Why buy Carbon Credits?
According to the New York Times, "carbon trading is one of the fastest growing specialities in financial services" Currently, the market is at 160 billion USD and it could expand to 3 trillion USD during the next 10 years.
Responses from over 2,000 carbon market professionals and their expectations for carbon prices by 2020 show that during the last 3 years of surveys, they consistently project prices of 30-50 USD per tCO2e. Overall, we believe most that high quality VER's have the potential to produce a very handsome return over the next few years.
With our carefully researched and verified projects, our prices are very competitive so the potential is huge, especially with more cap and trade markets that is anticipated to kick off in the US during the next few years and the new Australian compliance market that is already in place. Often referred to as a "pre-compliance buy" before regulation is introduced, investors are keen to buy at the earliest opportunity, especially when quality carbon credits are available in limited amounts.
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Buyers of carbon credits include companies that purchase offsets for their own operations and also who buy offsets that benefit their customers such as airline and travel companies, auto and oil organisations. Major participants like JP Morgan and Goldman Sachs are trailblazing the way in the traditional financial world. Big hitters such as Google have a goal to be carbon neutral within a certain timeframe and the list goes on. Please click here for an example of what JP Morgan are doing.....
Now is the Time....
For investors wishing to get involved, the voluntary carbon market is a great starting point due to a low cost entry level and the creation of recognised and identifiable carbon standards, true and transparent verifications by credible third party organisations and official registries and exchanges allowing clients to see their investment and track it throughout. Like any commodities market, timing and cost are key and the old adage "buy low and sell high" will apply in this situation which is why now is the time. Globally we are entering an exciting era and the new "green boom" is providing a once in a lifetime, historic opportunity to get involved at the early stages creating the ideal position for maximum returns whilst doing our bit for the planet. This is why it is important to purchase quality carbon credits from verifiable projects through consultants such as Validated Carbon Credits who only offer this type of product.
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A carbon footprint is an amount of pollution emitted by an organisation, event, product or individual person. Every single one of us has a carbon footprint because day to day modern living means that we are all responsible for releasing pollutants into the air through means such as travelling, using electricity and how we dispose of our domestic waste, etc. Short of living in a cave this will not change but there are many practices that can be adopted by us such as switching off appliances, buying energy saving products and choosing the services of companies who are actively involved in reducing emissions.
We can also purchase carbon credits which we can trade in the knowledge that when they are retired, will have actively reduced emissions from being released into the Earth's atmosphere. Retirement of the credit is the overall objective to ensure that it is not sold again and that the emission that it represents has been removed forever and will appear on the registry with that status.
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KYOTO, EUROPE & AMERICA
The Kyoto Protocol was born out of the global meeting held in Kyoto, Japan in December 1997 by 160 nations to establish a workable way forward towards cutting greenhouse gases on a global scale. Under this protocol, industrialised countries agreed to cut their emissions collectively to a level that is 5.2% lower than in 1990. Each nation’s target ranged from 8% for the European Union, 6% for Japan and so on. Although the USA has not ratified the protocol President Barack Obama has made it clear from the start of his presidency that reducing emissions is very much a priority on his agenda.
"To truly transform our economy, protect our security and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy."
Interestingly when petrol prices increased significantly in the US, sales of the Toyota Prius and Honda Insight, 2 hybrid "green" energy saving cars, notably increased also. However, when petrol prices fell again to more acceptable levels, so did the sales of the hybrid cars. Whilst many organisations and individuals genuinely care for the future of the planet, it is undoubtedly true that the majority are driven more to either saving or making money than they are of saving the world.
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