Understanding The Carbon Trading And Carbon Offset Businesses

By: The Green eBooks Directory Team

Entrepreneurs know from experience that money is always in the air. The smart ones know how to reach out and grab it. Even in today's struggling economy, there remain sectors where demand outstrips supply. Green businesses are an example of such niches. As businesses struggle to keep up with the greener standards the world is rapidly upgrading to, corporate giants as well as smaller businesses look for third parties to take care of their 'greening' needs. This is what creates the market for the green entrepreneur as a third party. Some of these relatively newer fields include carbon trading and carbon offset trading.

For those unfamiliar with the term, carbon credits are commodities that can be bought and sold. Carbon emissions are assigned a monetary value. This sets a limit on how much emission any manufacturer or business is willing to 'purchase' with credit. It is the equivalent of asking a business to pay to pollute. Obviously, it is a disincentive dressed as an incentive. One carbon credit gives the owner the right to emit one ton of carbon dioxide, which is the chief greenhouse gas. To put this in perspective, a single 2000-mile plane trip emits approximately one ton of carbon dioxide.

Therefore, the bottom line is that any business, if forced to pay for carbon emissions with credit, will look for ways to cut down on emissions. The net result is reduced environmental pollution, fewer greenhouse gases and a slower pace of global warming. The green businessman who brokers this carbon credit purchase can make an excellent living doing so. If you are thinking of launching a new business, carbon trading is a relatively virgin and futuristic market.

While the carbon trading business is riddled with new terms and jargon, the basic principle is clear. It gives the carbon credit broker the opportunity to earn great money while doing the right thing. For those of you who find this concept intriguing, you can learn more about the carbon brokering business model and how to get started in the industry by taking a look at Carbon Ventures, an eBook in the business and investment section of our directory.

A similar business idea is the carbon offset trading market. To those new to this term, 'carbon offset' means reducing greenhouse gas emissions in one place in order to balance out the creation of greenhouse gases somewhere else. Since greenhouse gases diffuse well into the atmosphere, it really does not matter where, geographically, they are being produced. The harm is far-reaching, the net effect being global warming. Thus a business could be manufacturing in Mexico and their offset program could be in the Amazon.

To simplify the concept further, here is an example. (None of these figures are real, but the illustration serves the purpose of explaining the concept.)

Company A produces Product X. In the manufacturing process, their factory emits one ton of carbon dioxide gas per year. To offset this emission, Company A arranges to have one acre of evergreen trees planted. Given a life expectancy of fifty years, these trees will absorb one ton of carbon dioxide gas per year. Alternatively, Company A could have taken some other scientifically-recognized step to balance their production of carbon dioxide. The ideal would be to achieve a balance and be 'carbon neutral', meaning there is no net addition of carbon dioxide to the atmosphere as a result of a particular business activity.

It stands to reason that Company A is busy running their operation, producing Product X. They have neither the expertise nor the knowledge of 'offset' options. It is easier for them to outsource this to a third party, namely the carbon offset trader. This is a whole new world waiting to be explored and if you are thinking of starting a new business, here is a great opportunity to make a living while doing right by planet earth.

Giant businesses everywhere are busy implementing 'consumer green' programs wherein the consumer participates in the company's green efforts by paying more for a product to cover the cost of carbon offsets. It is a credit to the collective human conscience that the average consumer is actually willing to pay more to help these large corporations do the right thing.