Carbon Credits – Sustainable, Ethical and Environmentally Friendly Investments
Following the Kyoto summit, an agreement was put in place, which ensured that countries now had a legal obligation to reduce the emission of greenhouse gases (GHGs). There were targets and stipulations put in place to guarantee that countries were meeting them. As well as this agreement, initiatives were put in place to assist the process, one of these: Carbon Credits.
Carbon Credits are a single credit which guarantees a one tonne reduction of CO2 emissions. This meant that companies had a goal to aim at. Should they stay under a certain amount then they would receive credits which can be traded on exchanges. However, for those companies that went over the limit, it would entail a cost. This market is known as the Compliance Market and the credits earned by companies are known as Certified Emissions Reductions (CER’s).
All of the offsets offered by White Knight Capital are Certified Emissions Reduction (CER) and not Verified Emissions Reduction (VER) credits.
As an investor it is very important to understand the main difference between these two forms of carbon credit. CER credits offer a liquid exchange with simple exit strategies. VER credits offer no true intrinsic value as there is no market or exchange within which for investors to sell.
CER credits are highly regulated and must meet a number of criteria as defined by the Clean Development Mechanism (CDM) and the Kyoto Protocol. The emissions reductions must be real, measurable, permanent, additional to what is already being done and independently verified. CER’s are traded in the secondary market, which is a liquid marketplace with visibility in future prices. This means that a clearing price for CER’s exists on exchanges and over the counter and as such, failing a complete market crash, they can be sold at ANY time. Carbon credits are traded on international exchanges, and the purchased carbon credits are held in a recognised carbon credit registry.
As such White Knight Capital seek to utilise FSA regulated entities as the custodians of CER’s which they promote.