Montserrat Geothermal progress report

Carbon Credit Trading

Here is a hypothetical situation on a mythical island somewhere among a chain of islands — Volcano islands. This island is somewhere in the South Pacific.

One day while the citizens of this hypothetical island are enjoying the endless sun and watching the tourist arrive on boats and planes they notice some serious businessmen arriving with brief cases and they are met by the guy who just won the last election. By the next week word is leaking out that these businessmen are serious about helping the citizens of this island lower their electric bill and the answer is Geothermal. Cheaper electricity — where do we sign?

Financing for the Geothermal power plant is found and in a few months the people of this island are seeing lower power bills. Everyone is celebrating.

There are plenty of lawyers on this island and they negotiated a fair deal for the people of the island. The power plant won’t get in the way of the tourist, who probably won’t even venture up the back road where the power plant is located.

It turns out that since Geothermal is considered a green or non polluting industry that companies are willing to pay the owners of the Hypothetical Geothermal on the Hypothetical Island money in trade so that these companies can stay in business. This is a win win deal for owners of the Hypothetical Geothermal power plant and the owners of the companies.

Then one of the local kids who went off college, comes home and starts asking about the income from selling carbon credits. Hey kid — what are you talking about? We have tiny electrical bills. The kid knows that the Geothermal power plant is producing 150 MW and is exporting a large chunk of the electricity to near-by islands. The kid, now a young woman and a college graduate learned about Carbon Credit Trading in her economics class.

Did the lawyers and politicians know about Carbon Credit Trading and the potential income from this to the island?

The kid is busy using her lap top computer and the new Internet wireless service  on her island to search for information about Carbon Credit Trading. In this not so hypothetical real world — Carbon Credit Trading is very real and there is more than enough information to put us all to sleep for the next decade.

Carbon credits create a market for reducing greenhouse emissions by giving a monetary value to the cost of polluting the air. Emissions become an internal cost of doing business and are visible on the balance sheet alongside raw materials and other liabilities or assets.

By way of example, consider a business that owns a factory putting out 100,000 tonnes of greenhouse gas emissions in a year. Its government is an Annex I country that enacts a law to limit the emissions that the business can produce. So the factory is given a quota of say 80,000 tonnes per year. The factory either reduces its emissions to 80,000 tonnes or is required to purchase carbon credits to offset the excess. After costing up alternatives the business may decide that it is uneconomical or infeasible to invest in new machinery for that year. Instead it may choose to buy carbon credits on the open market from organizations that have been approved as being able to sell legitimate carbon credits.

We should consider the impact of manufacturing alternative energy sources. For example, the energy consumed and the Carbon emitted in the manufacture and transportation of a large wind turbine would prohibit a credit being issued for a predetermined period of time.

* One seller might be a company that will offer to offset emissions through a project in the developing world, such as recovering methane from a swine farm to feed a power station that previously would use fossil fuel. So although the factory continues to emit gases, it would pay another group to reduce the equivalent of 20,000 tonnes of carbon dioxide emissions from the atmosphere for that year.
* Another seller may have already invested in new low-emission machinery and have a surplus of allowances as a result. The factory could make up for its emissions by buying 20,000 tonnes of allowances from them. The cost of the seller’s new machinery would be subsidized by the sale of allowances. Both the buyer and the seller would submit accounts for their emissions to prove that their allowances were met correctly.  [Source: http://en.wikipedia.org/wiki/Carbon_credits ]

Sources:

http://www.greenchipstocks.com/aqx_p/8087?gclid=CK-o_t_c3ZsCFQXGsgod7mED_Q

http://www.cantorco2e.com/Environment/?page=Voluntary_Services&gclid=CLmMnI3e3ZsCFVlM5Qod4TFB_w

http://www.verdantix.com/index.cfm/papers/Products.Details/product_id/42/first-rggi-auction-is-a-crucial-proof-of-concept/-?gclid=CK3wp6re3ZsCFQRM5QodZ0UTAg