The concept is simple.
Pollute too much and pay more. Pollute less and sell what remains of the allotment.
The concept of carbon credits has revolutionized the way companies account for environmental damage. Carbon credits, measured as one metric ton of carbon gas, are now a commodity that can be traded, bought and sold.
The way it works is simple. Each year companies are allotted a certain amount of credits. Say a company produces 100,000 tons of carbon per year and their quota is set to 80,000 tons. The company can either reduce their emissions by 20,000 tons or buy the 20,000 credits needed.
The push behind environmental change began with the United Nations Framework Convention on Climate Change (UNFCCC), an international treaty whose existence is to encourage businesses to become environmentally responsible. Emission allowances are determined by the Kyoto protocol, an amendment to the original treaty, which every major country except the United States and Australia have ratified. Both of these countries are adopting similar standards, however.
Don’t think that carbon neutral means no pollution. No reasonable person or group can expect zero pollution from large, industrial companies – try making plastic or even gas without emitting any carbon – but these carbon credits exist to reward those companies that have developed ways to lessen their environmental impact. By allowing these carbon credits to be bought and sold, companies’ ability to control their amount of pollution now has a direct cost.
Now there is a way for everyone to take part. Global Environmental Credits LTD (GEC) is one of the first companies making it possible for anyone to offset their carbon footprint, no business license needed. Developed as a platform similar to E*trade, GEC allows for online trading of carbon credits. Want to buy a few credits to offset that plane ride you took last week? You can do that here. Want to buy and retire a few credits, thus driving up the cost of the remaining credits? That can be done as well.
The message from companies like GEC is that there is now a tangible way for people to participate in the business of the environment. This isn’t a black and white issue and the GEC knows that. The important takeaway is choice. Savvy investors can buy up credits and sell them back to needy businesses – yes, it is similar to the stock market – while tree-huggers can buy and retire credits as quickly as they want to.
With the recent launch of the New Green Exchange, a part of the New York Mercantile Exchange, traders can already deal in carbon credits, but only in Europe. The American exchange is not open for business just yet.
Look for more information in the near future and get ready for a chance to directly participate in the care of our environment. Love me some green.