How to Sell Carbon Credits : Carbon Emissions Credit Trading

Cap and Trade : Cap and trade is an environmental policy tool that delivers results with a mandatory cap on emissions while providing sources flexibility in how they comply. Successful cap and trade programs reward innovation, efficiency, and early action and provide strict environmental accountability without inhibiting economic growth. Examples of successful cap and trade programs include the nationwide Acid Rain Program and the regional NO_x Budget Trading Program in the Northeast. Additionally, EPA issued the Clean Air Interstate Rule (CAIR) on March 10, 2005, to build on the success of these programs and achieve significant additional emission reductions.

Cap and Trade for the Power Sector : According to the United State Environmental Protection Agency, "Cap and Trade" is a market-based policy tool for protecting human health and the environment. A cap and trade program first sets an aggressive cap, or maximum limit, on emissions. Sources covered by the program then receive authorizations to emit in the form of emissions allowances, with the total amount of allowances limited by the cap. Each source can design its own compliance strategy to meet the overall reduction requirement, including sale or purchase of allowances, installation of pollution controls, implementation of efficiency measures, among other options. Individual control requirements are not specified under a cap and trade program, but each emissions source must surrender allowances equal to its actual emissions in order to comply. Sources must also completely and accurately measure and report all emissions in a timely manner to guarantee that the overall cap is achieved.

California Cap and Trade

The Assembly Bill 32 Scoping Plan identifies a cap-and-trade program as one of the main strategies California will employ to reduce the greenhouse gas (GHG) emissions that cause climate change. This program will help put California on the path to meet its?goal of reducing GHG emissions to 1990 levels by the year 2020, and ultimately achieving an 80% reduction from 1990 levels by 2050. Under cap-and-trade, an overall limit on GHG emissions from capped sectors will be established by the cap-and-trade program and facilities subject to the cap will be able to trade permits (allowances) to emit GHGs.

The California Air Resources Board (ARB) is working with stakeholders to design a California cap-and-trade program that is enforceable and meets the requirements of AB 32, including the need to consider any potential impacts on disproportionately impacted communities. Consistent with AB 32, ARB must adopt the cap-and-trade regulation by January 1, 2011, and the program itself must begin in 2012.

California also is working closely with six other western states and four Canadian provinces through the Western Climate Initiative (WCI) to design a regional cap-and-trade program that can deliver GHG emission reductions within the region at costs lower than could be realized through a California-only program. To that end, the ARB rule development schedule is being coordinated with the WCI timeline for development of a regional cap-and-trade program.

For more information: California Air Resources Board Website Section on Cap and Trade

Important Resources:

Chicago Climate Exchange CCX is a cap and trade system whose Members make a legally binding emission reduction commitment. Members are allocated annual emission allowances in accordance with their emissions Baseline and the CCX Emission Reduction Schedule. Members who reduce beyond their targets have surplus allowances to sell or bank; those who do not meet the targets comply by purchasing CCX Carbon Financial Instrument® (CFI®) contracts.

Key Features of the Chicago Climate Exchange

The CCX Tradable Commodity: The Carbon Financial Instrument® (CFI®). Each CFI contract represents 100 metric tons of CO₂ equivalent (CO₂e).

Geographic Coverage: Emission sources and offset projects worldwide.

Emission Targets and Timetable: Phase I (2003-2006) emission reduction targets were 1% per year, below an average of baseline period 1998-2001. Phase II parameters extend the reduction period through 2010, with an additional 2% reduction commitment for Phase I Members and a total of 6% reduction commitment by 2010 for new Members joining in Phase II.

Emission Baseline: Average of annual emissions during years 1998 through 2001 or the single year 2000 for new Phase II Members.

Gases Included: Emissions of the following six GHGs from facilities owned by CCX Members are covered, as applicable.

carbon dioxide (CO₂)
methane (CH₄)
nitrous oxide (N₂O)
hydrofluorocarbons (HFCs)
perfluorocarbons (PFCs)
sulfur hexafluoride (SF₆)

Emissions of all non-CO₂ GHGs are converted to metric tons CO₂e using the one-hundred-year Global Warming Potential (GWP) values established by the Intergovernmental Panel on Climate Change.

Emission Offsets: Issued to owners or aggregators of eligible offset projects that sequester, destroy or displace GHGs. Offsets are issued after mitigation occurs and required verification documentation is presented to CCX.

Eligible offset project categories include, but are not limited to:

CCX has developed standardized rules for issuing CFI contracts for the following types of projects:

Other project types, to be approved on a project-by-project basis, may include:

Energy efficiency and fuel switching
Clean Development Mechanism (CDM) eligible projects

International Emissions Trading Association

IETA is dedicated to:

the objectives of the United Nations Framework Convention on Climate Change and ultimately climate protection;
the establishment of effective market-based trading systems for greenhouse gas emissions by businesses that are demonstrably fair, open, efficient, accountable and consistent across national boundaries; and
maintaining societal equity and environmental integrity while establishing these systems.

Goals and Objectives

IETA will work for:

the development of an active, global greenhouse gas market, consistent across national boundaries and involving all flexibility mechanisms: the Clean Development Mechanism, Joint Implementation and emissions trading;
the creation of systems and instruments that will ensure effective business participation.

To be the premier voice for the business community on emissions trading, the objectives for the organization are to:

promote an integrated view of the emissions trading system as a solution to Climate Change;
participate in the design and implementation of national and international rules and guidelines; and
provide the most up-to-date and credible source of information on emissions trading and greenhouse gas market activity.

Work Program

To achieve its goals, IETA will focus on the following areas:

Develop components of the GHG market and trading systems. IETA has established a number of Working Groups that meet in workshops and seminars on topics that include; accounting, taxation, trade agreements, registries, validation and verification, as well as issues in the CDM. IETA will continue to map down initiatives that work in developing components of the GHG markets and help create a functioning GHG market.
Promote market mechanisms and participation in GHG markets. There continues to be the need for promoting market mechanisms and trading as one of the solutions available to businesses in order to minimize societal impact, within the framework of sustainable development. This includes substantial efforts, such as GHG Market Fora in non- Annex I countries, the Annual IETA Forum on the state and development of the GHG Market and the Carbon Expo Fair and Conference.
Development of a global GHG market. A critical element in IETA's work remains the linking of trading regimes among Annex I countires, and its significance for the GHG market. Another important issue is that of responses of buisness when operating in such a diverse environment. Cooperation with WBCSD, WEF and other organizations that have complementary roles must play an important role.
Capacity Building. IETA will develop and deliver courses on validation and verification based on the Validation & Verification Manual being developed with the World Bank as well as Workshops on Contracts for the CDM.

Environmental Defense Fund : Founded in 1967 as the Environmental Defense Fund, they help tackle the most serious environmental problems. A cap on greenhouse gases would put a price on pollution, creating a powerful economic incentive for polluters to find the cheapest possible ways to reduce emissions. Allowing farmers and foresters to participate by voluntarily sequestering carbon in a verified way could bring costs down significantly. Accommodating forest credits from abroad—as long as they represent real emissions reductions under a cap—would lower costs even further.