Carbon trading is the short-hand way of referring to all aspects of the buying and selling of the right to release carbon dioxide (CO2) or greenhouse gases (GHG) into the environment.
In very simple terms carbon trading is similar to a farmer's market. At this type of market there are the people who grow the fruit and vegetables and bring their goods to market where it is then sold (or traded) to those people who need to buy food.
In the case of the carbon market, large carbon emitting companies come to the market to buy or trade with businesses who are involved in removing carbon from the atmosphere, through activities such as planting forests, generating electricity through wind turbines or cutting back on methane released from landfills. This is known as carbon offsetting and is the basis of carbon trading.
A market is created where a quantity of carbon offsets - also known as carbon credits - is offered for sale in so many mtCO2e (Metric Tonne of Carbon Dioxide Equivalent) and is undertaken for a specific project which has been approved by some mechanism as a genuine contribution to GHG mitigation, such as CO2 Australia's Carbon Sequestration ProgramTM.
The buyers in a carbon trading market will typically be companies with an obligation to reduce their own emissions and entitled (to some extent) to do that by purchasing offsets.
Other buyers will be businesses not subject to compulsory compliance but buying in anticipation of future participation or purchasing carbon offsets voluntarily to mitigate global warming as part of a 'corporate social responsibility' (CSR) policy.
In the carbon trading market there will also be not-for-profit organisations that use carbon trading as a way to stimulate 'green' projects. And increasingly on both the selling and buying sides there are a mix of strategic and speculative investors in carbon credits, being parties which treat them as any other tradable commodity and aim to extract leverage - and ultimately profit - from movement in the market price.
Essentially, carbon emitting companies come to the carbon market for three key reasons:
- To offset their emissions for environmental compliance reasons;
- To voluntarily offset their emissions, and / or
- To invest in the carbon market in the hope that it will increase in value.
CO2 Group's environmental trading division, Carbon BancTM provides an access point for customers looking to access carbon credits through carbon trading, thereby managing their environmental obligations under a number of state and federal-based emissions trading schemes.
Carbon BancTM is active in the Small-scale Renewable Energy Scheme and the Large-scale Renewable Energy Target markets. Other environmental markets in which Carbon BancTM trades include the NSW Greenhouse Gas Reduction Scheme and Energy Saving Scheme, the Large Renewable Energy Scheme and the Victorian Energy Efficiency Scheme.
For more information on Carbon Banc or trading carbon, contact Ken Edwards on firstname.lastname@example.org or phone 03 9928 5115.