The Millions of Dollars Hidden in the Microeconomic Niches

All of us want to protect the planet, but if you’re reading this blog post you probably want to do it in a way that will make money. If so, then read on! This article is about how climate change has become big business for some companies and investors. We’ll explore what carbon credits are and why they’ve generated billions of dollars in revenue. We’ll look at how to invest in carbon credits, an emerging market that has begun to trade like a stock. Lastly we’ll review some blue chip stocks that are incorporating climate change into their product offerings and business plans.

Carbon credits are the currency of a new economy being born from efforts to combat global warming. Their market value fluctuates depending on the supply of, and demand for, carbon credits determined by government policy. One carbon credit is equal to one metric ton of CO2 or other greenhouse gas emissions reduced or avoided.

The purpose of cap-and-trade programs is to reduce the total level of greenhouse gas emissions from the capped sector. In practice, this is done by putting a price on each metric ton of greenhouse gas emitted and letting emitters decide for themselves whether to pay that price or reduce their emissions.

As more emitters reduce their emissions to avoid paying the carbon credit price, fewer credits are available and thus they become more valuable. The higher the carbon credit price, the more profitable it is for emitters to reduce their emissions. If emitters have difficulty reducing their emissions sufficiently, they could purchase additional credits from those who have reduced their emissions beyond what’s required by regulation.

The European Union Emissions Trading System is the world’s first and largest cap-and-trade program aimed at reducing greenhouse gas emissions. The U.S. passed The American Clean Energy and Security Act in June of 2009, but it has yet to be funded or implemented by the U.S. Environmental Protection Agency.

The is one of the world’s largest cap-and-trade systems, covering large parts of the region’s power sector.

The Regional Greenhouse Gas Initiative is a cooperative effort by nine Northeast and Mid-Atlantic states to reduce greenhouse gas emissions from electric power plants through cost-effective market-based limits on CO2 emissions. This program began on January 1, 2009 with full regional coverage in 2014.

There are no carbon credit exchanges in the U.S., so American companies can’t participate in carbon credits trading unless they have an office overseas or through a broker/dealer that specializes in these products. Trading is done via direct deals between buyers and sellers. The price of each transaction is determined by supply and demand.

One CO2 credit was sold on the European Climate Exchange, which is now closed to new investors, for €13.43 in June 2011. The price of carbon varies depending on each country’s regulatory regime. Carbon prices are among the highest in Europe because energy-intensive industries are responsible for most emissions there.