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Carbon Offset Plan Allows Businesses to Trade Environmental ‘Credit’

As scientists debate how to address climate change, one proposal for businesses creates a carbon credit system that allows emission producing companies to buy credits from companies that use energy efficient technologies as a way to offset overall environmental impact.

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    Now, carbon credits as a way to clean up the air. NewsHour correspondent Spencer Michels has our report.

  • SPENCER MICHELS, NewsHour Correspondent:

    In the San Francisco offices of the financial services firm Cantor Fitzgerald, traders buy and sell stocks and bonds in one room, while just behind them a smaller group trades a new, controversial green commodity, carbon offsets.


    What we are is we deal with environmental brokerage, and so we do environmental commodities. And so we're both putting up — you know, we're matching investors with capital.


    The idea behind carbon offsets is to lessen the impact of carbon dioxide that people, companies, and vehicles emit into the air. By investing in ventures like hydroelectric power that can reduce overall CO-2 production, or forests, which store CO-2, the original carbon emission is offset.

    Buying and selling such offsets can actually be quite lucrative, says Josh Margolis, who runs Cantor CO2e.

  • JOSH MARGOLIS, Carbon Offset Trader:

    There's a tremendous amount of money that can be made or lost, and there are people who are flocking to this business with the idea that they're going to make a gazillion dollars.


    This trading floor and others work like commodity exchanges, where investors bet that the price of offsets, now varying between $1 and $3 a ton, will go up or down depending on the demand, and the brokers take a commission on sales.

    A growing number of American firms and individuals are buying carbon offsets voluntarily, since the U.S. has no mandatory government program.

    Here's how offsets work. An individual or a company — say, an airline — creates carbon dioxide by burning fossil fuels like jet fuel. The CO-2 is emitted into the air and forms a layer of greenhouse gas that traps heat and contributes to global warming.

    Meanwhile, a different company builds windmills, for example, that generate electricity, an activity that will reduce the need for fossil fuel and thereby cut the amount of CO-2 emitted.

    The windmill firm sells a credit for the carbon dioxide it has eliminated to the airline company that can't stop creating CO-2 and uses the money to build more windmills.

    Dan Kammen, who teaches energy science and policy at U.C. Berkeley, took us to such a windmill project, which has benefited greatly by the sale of offsets.

  • DAN KAMMEN, U.C. Berkeley:

    This farm probably would not be as large as it is if they didn't have these carbon credits because the profit margin would have been smaller.


    Kammen says voluntary projects like this are crucial to combat climate change.


    The carbon offset market is critically important because it provides one of the ways to bring in capital and new innovative companies into finding solutions. And this is not something we're going to solve without the private sector becoming a real dominant player in this game.


    While trading carbon offsets may improve the environment, it also appeals to companies who want to look green. And it serves as a hedge against future regulation, according to Margolis.


    Because they anticipate that they will be required to, they're buying emission reduction credits now and greenhouse gas offsets now because they believe that their customers want them to. They believe that they can make more money if they sell a greener product.