Are Carbon Credits A Good Idea?

By Todd Fratzel on Green Building

image of smoke stack pollutionThe recent Green movement in this country has been nice to see. I think the skyrocketing fuel costs have finally struck a nerve with folks and we’re starting to evaluate the choices we make on a daily basis. One of the interesting topics that I’ve been reading about lately is the sale and exchange of Carbon Credits. I was reading an interesting blog post, Carbon Emission Reduction Is Next Commodity, in which the author points to the growing commodity market for buying and selling carbon credits.

Carbon Credits are a result of the Kyoto Protocol (which this country is not yet a part of) that was put in place to curb global warming and pollution. The idea is rather simple, in countries that joined the Kyoto Protocol have agreed to reduce their carbon footprint. In order to reduce that carbon footprint a country, company or individual needs to reduce the amount of Carbon Dioxide being released into the environment.

Here’s where the Carbon Credits come into play. Let’s say a company decides to install hydro power for their power supply. And let’s say they create more power then they need to run their business. Because hydro power is generated without creating CO2 then the company could calculate the amount of excess power they have saved which would have produced CO2. They could then hire a certified reviewer to document their Certified Emission Reduction (CER). The company could then turn around and sell those CER’s on the market as a commodity.

Another company may decide that it’s cheaper to buy those CER’s instead of installing some type of new equipment that would reduce their carbon footprint. This may sound like a bunch of crap but if you think about it this has the potential to fuel other companies to invest in carbon footprint reduction projects. By creating a commodity that other people need we may in fact create an environment of serious competition to create CER’s on a large scale.

I’m interested to see how this plays out over time. On the surface it really seems like a plausible idea to me. Only time will tell if this commodity will one day become as important as a barrel of oil has become.

About the author

Todd Fratzel

I'm full time builder for a large construction company in New Hampshire. I run their design-build division that specializes in custom homes, commercial design-build projects and sub-divisions. I'm also a licensed civil and structural engineer with extensive experience in civil and structural design and home construction. My hope is that I can share my experience in the home construction, home improvement and home renovation profession with other builders and home owners. I'm also the Editor-in-Chief and Founder of Tool Box Buzz. Please feel free to contact me if you have any questions, suggestions or you'd like to inquire about advertising on this site.

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3 Comments

  1. threeacres says:

    I think the idea sounds good but that there are better and cheaper ways to go about forcing companies to reduce their carbon emissions. As soon as you said “hire someone” it reminded me of the current LEED program in the US.

    I could go on and on about this but basically I work for a company that specializes in making buildings LEED certified across the country and world. I have contributed to making multiple building LEED certified in my short time working there. The whole certification process is a waste of time and money all around for the architects, engineers, contractors, and the reviewers. The idea is good but the process itself, the loop holes people find, and the hoops everyone has to jump through is a joke. The reviewers are extremely backlogged and some projects get barely looked at while others are gone over with a fine tuned comb. There’s no consistency so the certification itself doesn’t necessarily mean much. Plus, the cost for ANY size new construction commercial building is $1600.

    My company has always been on the cutting edge of technology and designed very energy efficient buildings but now we/I have to spend months designing energy models that necessarily mean anything. All so that they can hang a small bronze plaque in their lobby that says they are certified. It would so much easier if the owners were just educated enough to understand how their buildings use energy instead of having to get it certified to tell them its energy efficient.

    Sorry, that was so long but it’s something I’m a little passionate about. : ) Hope I didn’t offend you are anything.

  2. Todd says:

    @ threeacres – I’m not offended at all. I posted this to ask the question about how other people feel about the subject.

    I am sitting on the fence. I think that it has the possibility to work out quite well if it can be done in a way that doesn’t get corrupted.

    I sat down with some entrepreneurs the other day that were seeking financing and engineering support for a waste to energy plant. Basically they want to convert municipal waste into methane and heat. The topic of carbon credits came up as a potential way to make the project more financially feasible. So I thought it was quite interesting to see that the carbon credit idea is at least in the back of people’s minds.

  3. threeacres says:

    Good I’m glad you’re not offended.

    Yeah, it could probably work out but if we took all the time and money spent on projects like this and put directly it into making energy efficient or sustainable equipment/practice more accessible I think we’d be better off. For example, with all the time and money spent making a building LEED certified the owner could have bought a more efficient boiler than the one they would have previously used. Or instead of carbon credits the government could allow tax breaks for companies that get over 90% of their energy through a sustainable source. It’s all about tipping the scales so that sustainable design’s upfront costs are cheaper or equal to traditional practices. Business owners aren’t stupid they will go with whichever one saves them the most money.

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