May 9, 2007 4:00 AM PDT
Green-tech pros eye cash in carbon
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Credits designed to restrict emissions of carbon dioxide and other greenhouse gases are being discussed in the context of climate change regulation.
But trading in emissions for different types of pollutants, such as sulfur dioxide, has been going on for years. Renewable Energy Credits are another type of green trading program, driven by government mandates for utilities to generate a certain amount of renewable energy.
The Regional Greenhouse Gas Initiative will use a cap-and-trade system set to go online in 2009. It will give electricity generators a cap on the amount of greenhouse gases they can emit. If they stay below that allowance, they get credits for those offset emissions, which can be exchanged with other polluters.
Carbon trading has already taken hold in Europe, where about 1 billion tons of carbon dioxide were transacted last year on the European Union's Emissions Trading Scheme, at a value of more than 18 billion euros (or $24.41 billion), according to carbon finance research firm Point Carbon.
Many of these exchanged credits are generated through project finance deals and voluntary carbon offset arrangements. In one example, carbon credits were generated in a solar power project in Malaysia, said Dan Pullman, vice president of investment bank McNamee Lawrence, which advises alternative energy companies, including voluntary carbon offset company Carbon Neutral.
Because the solar power replaced a dirtier form of power generation, the financiers of the project gained carbon credits, which could be sold on a carbon exchange.
How policies are shaped has a significant impact on the price of credits. Emissions limits that are not stringent will results in a surplus of allowances, according to experts.
Phoenix Motorcars, for example, can get carbon credits in addition to its zero-emissions vehicle credits, which are part of a $25 million California clean energy incentive program (click here for PDF).
But the company isn't doing anything with the carbon credits because they "have almost no value," said Bliss. By contrast, the California state zero-emission credits will likely be in high demand from other automakers, he said.
Planktos' Kubiak has also found that the price for carbon emissions is very low, particularly in the regulated European market because of a surplus of allowances. But he anticipates prices will go up over time and said that the company, which intends to sell credits directly, "can do quite well" at $5 per ton of carbon.
Pullman said that the arrival of federal U.S. regulations will help drive more trading. Also required are more certification authorities to evaluate carbon offset schemes, he said. There have been complaints that carbon offsets are not adequately vetted or certified.
"Regulations will definitely accelerate (carbon management). It creates a much more active environment for trading and exchanging carbon credits," Pullman said. "We're a little bit in the Wild West right now."
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