One of the fastest growing fields of investment these days is green investing. Since everyone is always looking for the next big thing this article will focus on what I think is going to be one of the best investment opportunities to look at in a long time: carbon offset credits.
It can be very confusing and certainly requires a good deal of time to sift through the various information that you can readily collect on the internet in regard to carbon offset investments. Do you have either the time or desire to do this? The question to one or both of these questions is probably no. But if you don’t do research, like you would with any other investment, then you’re taking a gamble. So what do you do? Let’s take a quick look at what the whole field is about.
What are carbon credits? That takes a bit of explaining but we’ll make it brief. Carbon credits are what many companies throughout the world are buying to offset their own carbon emissions. These are companies that are in countries that signed the Kyoto protocol a number of years ago. Countries that did not sign the protocol include the U.S., China and India although the Obama administration does want to require U.S. companies to abide by the protocol’s requirements soon. For now, in the U.S. there are voluntary requirements.
A unit of carbon credit is basically a unit of some type of project that consumes one ton of carbon dioxide most typically, although there are other greenhouse gases which are included, and in doing so creates oxygen. The most common way that this happens in nature is when plants and trees take in carbon dioxide and expel oxygen. So nature does this on its own and there are also a number of ways that man has devised to offset carbon admissions as well.
So what is a simple example of utilizing a carbon credit? You can buy the rights to the oxygen that is emitted by a certain amount of land in a rainforest and use this credit to offset the carbon that your company or even your household is emitting. There are simple ways to calculate the amount of carbon you or your company are responsible for emitting each year and once you calculate the amount you then know how much you have to purchase in the way of carbon credits to make your “carbon footprint” neutral.
How does all this work? This is quite easy, actually. There are many organizations, private and government, that have created many projects around the world that sustain rain forests and other natural areas that create oxygen and consume carbon dioxide. For the most part these projects are regulated by a number of organizations including the World Bank and various carbon exchanges. Do not deal with any project that is not regulated and/or endorsed by a respected international organization.
So all you have to do is purchase carbon credits from a regulated and approved project and your company or household can then become carbon neutral. You have paid to help control global warming and the general welfare of the planet on a very basic level. In many countries this is mandatory but in the countries mentioned above it is not. Still, even in these countries, many individuals and companies are purchasing carbon credits – companies, to proclaim their commitment to helping the environment, among other things, and individuals out of a sense of responsibility to help the environment. What is in the process of being created, therefore, is a huge market for carbon credit purchasing and trading.
And if there is a trading market there is a way to make money. Ever heard of “buy low, sell high.” In the second part of this article we’ll talk more specifically about why this market is taking off and who some of the major players are.