Green Energy Credits Can Help Your Business Profit from Being Green!

Here’s a thought: can we control pollution by building a nation-wide program that can give financial incentives to industries that can better their environmental and operational baselines? A program for carbon emissions trading, trading green energy credits, does just that. The credits, and the trading system that has evolved from them, are a unique way to control air pollution that could benefit your company on the bottom line as well.

The 1990 Clean Air Act amendments defined a new era in means of control of air pollution: provide for an overall limit on emissions, for specific pollutants for specific industries, and let the industries work together to make certain it works, by giving them a way to benefit from doing better than the permit requires. This program was the result of the recognition that we need electricity, that energy generation emits pollutants, and that simply demanding massive reductions in emissions is a certain way to make the cost of electricity very high.

Under the EPA program, a “Cap”, or a maximum permitted amount of emissions, is defined for a group of sources. Permit holders are given allowances to emit a specific quantity of pollutants (e.g., a “ton”). The total number of allowances across a target group defines the level of the cap.

Industries can meet their emissions compliance targets by technology, that is, with air pollution control equipment, or by acquiring allowances from other permit holders, at a price. So, those who do better than their permit requirements have allowances available that can be sold to other operators, which provides all the parties in the group with a market-based means of achieving compliance, since the total amount of allowances represents the maximum allowable total emissions from that industry group.

Those who have money for technology install it and reduce their emissions. They can sell their excess allowances to those who do not have the newer technology, and they will certainly sell them for as much as they can–at more than the cost of the technology-thereby eventually forcing the others to spend the capital budget to be competitive.

Further, EPA regularly removes a number of allowances from the pool to ratchet down the total amount of air pollution. This program has been overwhelmingly successful in controlling Acid Rain.

So interest has been building in finding a similar means to reduce greenhouse gases. EPA doesn’t regulate these yet in this fashion. But a financial market has developed that is willing to assign values to credits, and in Europe an already existing program provided a model.

In the US, the Chicago Climate Exchange allows its members to trade carbon financial instruments, based on caps and offsets agreed to by members and the exchange. Members trade contracts based on 100 metric tons of carbon emissions per contract. The mechanism for defining the cap is a baseline of operations for each business or member. If your operation does not directly emit carbon dioxide, other emissions can be converted to carbon dioxide equivalents, using a Greenhouse Gas Protocol from the World Business Council for Sustainable Development. The membership requires a legally binding commitment to a phased reduction in carbon generation.

Entities who provide and trade these credits include car makers and coal companies, forestry companies, cities, waste companies, universities, and states. The emissions sources and offset projects are found across the hemisphere and include fleet fuels, forest plantings and agricultural methane control schemes–things that benefit our air via reduction of CO2.

So, how do you control air pollution, without limiting the benefits of of the energy we use as a modern civilization? Create a way to make limiting air pollution less costly, and even profitable! If anyone tells you you can’t make money by controlling pollution, tell them there is power in green! it’s green, like money, and trades, like commodities, and traders and industries both benefit!

Rick Demkovich is an environmental consultant with more than 20 years in the field, and is the president of Environmental Development Solutions, Inc.

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