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Worldwide pressure to reduce greenhouse gas emissions is leading to more than an environmentally conscious public; it’s also contributing to a plethora of new industries. One of the fastest growing is the global trade in carbon credits. According to the World Bank, international carbon sales quadrupled in 2006 to more than US$25 billion. In Canada, Alberta is leading that charge: The province was the first in the country to introduce greenhouse gas legislation on July 1, 2007.
Based on the new rules, utilities and other regulated companies have three options for meeting new greenhouse gas emission targets: (1) implement new technology that reduces carbon emissions; (2) purchase carbon credits from a third party; or (3) pay $15 per tonne into a provincially administered technology and research fund.
While many companies have already been exploring new technologies for reducing their emissions, the development process is complex and time-consuming, especially for oil and gas-related industries. As a result, a number of companies are looking to purchase carbon credits from another source.
How it Works
According to Alberta regulations, carbon credits can be generated through various methods. One attracting the most attention is through “no till” practices in the agriculture industry.
“Basically, no-till means that instead of tilling their land, farmers would do direct seeding. This process removes carbon from the air and stores it in the soil,” explains Dean Klippenstine, Meyers Norris Penny’s director of primary producers.
Dean adds that most businesses generating carbon credits will want to use an aggregator or carbon credit trader to help market the credits. Aggregators pool the carbon credits from farmers and other sources, then market them to utilities and other major companies to offset their own emissions. Meyers Norris Penny held information seminars on the new industry in February 2008.
“Carbon credit trading is an emerging market. It rewards farmers and others for pursuing more carbon-neutral ways of doing business.”
While opponents to carbon credit trading may fear it becomes a quick-fix solution for major emitters, Dean points out concerns over global warning are so widespread, everyone is under the microscope to demonstrate their commitment to the environment. The carbon credits market provides a financial incentive for both buyers and sellers to continue to find ways to reduce overall emissions.
“In Canada and around the world, more and more companies are recognizing that practicing sound corporate social responsibility isn’t just good for our community, it’s good for business,” says Dean.
By Dean Klippenstine, director of primary producers. For more information, please contact your local MNP advisor or Dean at 1.877.500.0780
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