Thursday, July 2, 2009

Carbon credit market stays strong

By Jackie Noblett

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It isn’t easy to be green, especially in a tough economy.

But financial turbulence has yet to stop many companies from lowering their carbon footprint through the purchase of renewable energy or carbon reduction credits on the voluntary market. Yet a potential sea change in the carbon trading environment — a proposed mandatory program for major polluters — may make it even harder and more expensive for smaller companies to green their business.

The poor economy has made businesses smarter about what types of projects they fund through voluntary carbon credit purchases, but it has not diverted them from sustainability goals, say carbon credit brokers.

“A lot of people think it has to be an all or nothing type of purchase. Most voluntary buyers are taking a baby step approach now,” said Kenneth Ivanic, vice president at World Energy Solutions Inc., an energy exchange service provider in Worcester.

Carbon offsets can support renewable energy projects that reduce the need for fossil fuel generators or carbon reduction projects that help entities like farms cut carbon emissions.

Research shows the voluntary market for carbon offsets continues to explode. Some 123.4 million metric tons of carbon dioxide offsets worth $704.8 million were purchased in 2008, nearly double the amount purchased in 2007, according to a report by New Carbon Finance. And pressures point to that trend continuing.

Staples Inc. purchased 122,000 megawatt-hours of renewable energy credits last year — enough to mitigate 20 percent of its electricity usage.

“The challenge that we have is we continue to grow. … While we’re doing a lot in terms of building efficiency, there continues to be an impact,” said sustainability manager Jake Swenson.

To mitigate the cost of the credits, Staples uses part of the savings it realizes from making its buildings more efficient in the purchase.

But not all entities are choosing to pursue carbon offset purchases in today’s environment. Williams College in western Massachusetts purchased carbon offsets in 2007 and 2008 to mitigate the impact of family members traveling for commencement ceremonies. It decided against buying credits this year.

“Obviously (the poor economy) played into it,” said spokeswoman Stephanie Boyd, “but I think it is more that we would feel more comfortable doing it in a regulated environment.”

That regulatory concept involving some government oversight would likely be set aside if some lawmakers have their way on a major polluters program. Under the climate bill passed by the U.S. House of Representatives last week, big polluters would be required to purchase carbon credits in a market under the watchful eye of the government.

“Once you have a mandatory system, that’s going to become state of the art,” said Jeff Karp, a climate attorney for Boston-based law firm Sullivan & Worcester LLP. “The voluntary market will have to move toward the mandatory compliance market.”

That would create competition for credits, raising the cost of a carbon credit, experts say.

How is a carbon credit made and bought?

1.  A renewable energy or carbon reduction project is developed.

2.  An entity measures how much energy is produced or carbon dioxide prevented from release.

3.  The project is submitted to an independent verification agency to determine that the project lives up to its expectations.

4.  The project is divided into a number of credits, each representing one megawatt-hour of electricity produced or ton of CO2 not emitted.

5.  Those credits are placed into a market like the Chicago Climate Exchange or sold to carbon offset brokers.

6.  Companies looking to buy credits do so through a broker or one of several trading platforms for carbon offsets.