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.
Do people buy carbon credits simply to offset their CO2 emissions and, hence, feel better about themselves? Or do people buy carbon credits as an investment from which they stand to profit financially?
Caitlin Sparks responds:
Individuals are generally buying carbon credits solely to mitigate part of their carbon impact. Larger companies, however, are indeed buying credits in a way that allows them to profit financially.
These companies provide finance for the development of projects that generate credits -- like a wind farm or biomass plant. This upfront finance "buys" them the right to the resultant credits, which they then resell to the market at a higher price. Others, like hedge funds or investors, are buying credits in bulk to sell at a future date, when the expected return might be higher due to lower supply.
Dan Kammen responds:
Right now carbon markets in the U. S. are voluntary, so they are largely to 'feel better' about your emissions. That is not to say that they are not useful. The funds do go to projects -- wind farms, reforestation, and other efforts -- so there is value in buying carbon offsets even today in the U.S.
In Europe the market is large and active, because companies that generate electricity from fossil-fuel sources are required to offset their emissions.