The carbon offset market is growing, spurred by businesses and consumers who want to lessen their carbon footprint by investing in ventures like hydroelectric power or forest regeneration. Two experts on carbon credits took your questions.
Can an individual trade carbon credits like one can trade stocks? Is one able to hold a carbon credit and sell it at a later date?
Dan Kammen responds:
The answer to this depends on how the market evolves, but yes, 'banking' credits is generally seen as an important part of developing a functioning market.
Some firms today register their emissions, and then as they reduce emissions through clean energy, or via efficiency, or by buying products and services that are known to be lower in carbon emissions, they document these savings. This is a form of banking that can be done formally in California via the California Climate Action Registry (http://www.climateregistry.org/). Under the California Climate Action Registry emissions reductions are formally recorded and can be banked. In other locations, where carbon markets are evolving, the rules may be different.
Caitlin Sparks responds:
Credit sales are conducted as over-the-counter transactions, as opposed to on an open exchange, like the stock market. The transactions are conducted directly between buyer and seller or with the assistance of a carbon broker, trader or reseller. Typically individuals don't trade credits (primarily because carbon buying and reselling requires infrastructure) although larger trading houses or brokerages do. Rather, individuals purchase carbon credits to offset the emissions associated with household or travel emissions.
Yes, one can purchase a credit and resell it or even hold it for a future sale. In fact, some actors in the carbon market are doing just that -- buying credits now in anticipation that future greenhouse gas legislation will raise the demand for carbon credits, driving prices upward.