Carbon Credits

Carbon Credit is the "financing mechanism", usually expressed in the units of tc02e - tonnes of carbon di oxide emission - and one earns Carbon Credits through generation of Electricity either through renwable energy sources ( such as Wind, Solar, Bio mass and Mini Hydro) or, through Energy Efficiency Programmes.

Basic steps followed in developing a 'Carbon Credit Offer'

1. Establish where the Project stands - in terms of current emissions, future emissions projections and the cost curve of current and future reductions.
   
   
2. Emissions Trading is a 'market-based system' that allows firms the flexibility to select cost-effective solutions to achieve established environmental goals. Emissions Trading encourages compliance and financial managers to pursue 'cost-effective emission reduction strategies' and provides incentives to emitters to develop the means by which emissions can inexpensively be reduced.
   
   
3. Establish clear goals for the 'carbon trading' viz.
   
   
   • Income (now or in the future)
   • Policy influence
   • Clarifying financial value
   • Demonstrating leadership
   • Green publicity
   • Other values
     
   
   
4. Describe the reductions. This needs to be a concise description that informs the Buyer of how the reductions are created - whether entity-based or from a project. It should build the Buyer's confidence in the environmental quality of the reductions.
   
   
5. Demonstrate that the reductions are "excess" of any existing (or expected) Governmental obligation.
   
   
6. Assure Ownership of reductions.
   
   
7. Identify the measurement methodology used and how it relates to the best such practice. For non-CO2 gasses, this should address the "global warming potential" (GWP) involved, including specifying the gas reduced, the best GWP under current science and the net result .
   
   
8. Assure that actual measurements are high quality and follow the methodology. Actual measurements are important for the baseline (1990 or an alternative that is explained well) as well as for on-going annual performance.
   
   
9. Determine an appropriate liability structure and demonstrate your creditworthiness.
   
   In recent transactions, Sellers assured Buyers that if any reductions sold become invalid, the seller will replace them with reductions that are valid, or else return the payment with interest. Another potential way of improving Buyer confidence is to look to an insurance product for providing this assurance. Including a statement of the Seller Company's creditworthiness also bolsters the standing.
   
   
10. We & our Associates in Europe will provide guidance on price, structure & payment terms, given current market dynamics, of how to price the offer as well as types of payment structures that will attract buyer interest.
    
    For some Sellers, immediate payment is not so important in early experimental trades, and they may consider forward settling structures that will provide payment upon delivery of the reductions in the future. To others, more significant up-front payment is critical to their business, so forward sales are better. Again, we offer guidance on what the market will bear right now on both direct sales, forward sales and options.
    
    
11. Decide on when/how to market the offer and would present to interested Buyers at the time & under conditions determined to be best in consultations with you.
    
    
12. We work to find solutions that meet both the Buyer's and Seller's needs.