You may want to take a look at my column from June 2006, which addressed a reader's question about the ability to sell carbon reductions associated with a business moving from a high-carbon intensity power grid to a low-carbon intensity grid. That question was pretty easy to answer; this one encompasses more permutations that readers may find relevant to their own situations. I've presented three such cases here:

Case 1: You have committed to retiring the environmental benefits of your renewable energy purchase. If you have purchased 100% renewable energy as part of your environmental branding or market positioning, and you have publicized the purchase as part of such branding or positioning, I would argue that you have retired the environmental benefits associated with the renewable energy purchase. Selling the benefits again to someone else wouldn't be appropriate. Keep in mind that you may not have purchased the CO2 reductions with the renewable energy; before re-selling such an attribute you have to make sure you bought it in the first place. The fact that renewable energy's CO2 reductions are indirect (occurring not at the wind farm but at a powerplant) makes the question more complicated.

Case 2: You haven't committed to retiring the environmental benefits of your renewable energy purchase, and want to convert them into saleable carbon reductions through your company. In other words, if you’ve purchased 100% renewable energy and the associated environmental attributes, could you calculate and sell the carbon savings resulting from the fact that you no longer purchase electricity from your grid? For this approach to work, you would almost have to physically linked to the energy source from which you’re purchasing the environmental benefits. Most people aren’t -- they are buying renewable energy credits (RECs) or green tags that don’t suggest any physical transfer of electricity. The distinction is important because of the possibility of gaming. Imagine wind generation in a hydro-based grid in the Pacific Northwest. That wind power may not displace much in the way of fossil fuel generation. But let’s say you buy RECs from that wind generation, and then want to sell credits against your displaced electricity in the Midwest, where coal dominates the grid. You’ve flipped the RECs credits in a way that multiplies their CO2 value, but which doesn’t actually affect what’s happening at any power plants. You’re still buying coal-fired power, so you can’t very well sell reductions based on displacing that coal-fired power.

Case 3: You are speculating in the environmental commodities market. What I think you’d really be doing in this case is buying some renewable energy credits with the goal of re-selling them at a profit, whether now or later, and whether as RECs or CO2 credits. The fact that you’ve bought just enough to cover your own company’s emissions ends up being irrelevant, as is the carbon intensity of the grid serving your company. You’re really just buying the environmental attributes of the renewable energy source and hoping to resell those environmental attributes. But that’s exactly what the environmental commodity brokers are doing. You’d have to assume that you can do a better job marketing the RECs and their carbon benefits than the original project developer or broker was able to do, which seems like a risky proposition. Moreover, translating between RECs and carbon is a tricky subject -- a subject I discussed here before.

As was the case with the my June 2006 column, the key question you have to answer if you’re trying to commoditize carbon emissions reductions is whether you have done something that actually changes the amount of carbon making it to the atmosphere. If so, then you have to ask the question of whether you own those reductions. There are plenty of other questions that can come up, but these two have to be tackled first.

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Dr. Mark C. Trexler has more than 25 years of energy and environmental experience, and has focused on global climate change since joining the World Resources Institute in 1988. He is now president of Trexler Climate + Energy Services, which provides strategic, market, and project services to clients around the world.