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Carbon credits will play an important role in New
Jersey’s future. As a state with a long history of
manufacturing, we have to come to terms with the
reality of industrial greenhouse gas emissions. In
February of this year, Governor Corzine set forth
ambitious goals for reducing New Jersey’s greenhouse
gas emissions by approximately 20 percent by the
year 2020. Municipalities should therefore
familiarize themselves with carbon trading as a
method of reducing emissions and acquiring
alternative financing for projects that will provide
a benefit to the environment.
Carbon credits arose as the result of the “Kyoto
Protocol,” wherein various countries agreed to limit
the emissions of these gases by operators (i.e.
local business and other entities). Carbon credits
are effectively a unique market-driven system used
to manage and reduce greenhouse gas emissions. In
general, companies can buy and sell these credits.
If a manufacturer or power plant reduces their
current emissions then they produce these credits,
which can be sold to a company that needs to offset
its emissions. Furthermore, some new projects can
create credits when they meet certain criteria.
Carbon credits can be created through the use of new
technology for existing facilities or captured prior
to the beginning of a new project. In the case of
an existing facility, such as a factory, by
measuring existing emissions one can create a
baseline and then gauge the reduction in emissions
by the use of the new technology. The difference
between baseline emissions and the reduction is
effectively the number of carbon credits created
through this process.
In
the case of new construction, if a project is
delayed or cannot be built due to funding, new
carbon credits can be created by building in a
method that reduces typical emissions or captures
methane gas, for example, on a landfill. These
carbon credits can then be sold and the proceeds
used in the financing of the construction. The
critical factor for this application is that the
carbon credit financing must be an integral part of
getting the project off the ground, there must be
real emission reduction (versus typical
construction, which EAI can verify), and the use of
carbon credits as financing must be incorporated
into the original business plan.
Carbon credit trading gives businesses the incentive
to reduce their current emissions and become more
environmentally friendly, since the sale of the
carbon credits can offset the cost invested in new
technologies or methods for producing or building.
Numerous companies, including some of the largest
multi-national fortune 500 corporations currently
have programs to abate, offset or sequester
emissions as part of their corporate policy.
Solutions can be very unique. For example, under
what is termed the Clean Development Mechanism
(CDR), a company may offset emissions by planting
trees for every carbon credit they offset. These
trees would reduce carbon dioxide from the
atmosphere.
There are currently four exchanges that trade carbon
credits which include the Chicago Climate Exchange,
the European Climate Exchange, Nord Pool, and
PowerNext. Companies such as CarbonNeutral® have
established guidelines for the creation of carbon
credits and emission reductions and also have an
interest in purchasing credits where appropriate.
They can also be valuable in the planning stages to
assist one in developing a carbon credit-financing
program. Additionally, EAI is certified to provide
verification of the credits.
Carbon credits are complex, but with the right
expertise, they provide an easy way to reduce
emissions and create financing for challenging but
important projects. New Jersey and its Mayors can
benefit from an awareness of this developing market
and utilize it to lead the way in emission
reductions in the 21st century. |
