Global warming and emissions science are forcing regulatory reform in virtually all business sectors, and corporations are facing significant liability and financial responsibility for reducing GHG emissions. While state and federal regulations make corporate environmental compliance more challenging, they are also creating new revenue opportunities.
Companies that act now can generate significant additional revenues through investments in GHG-related assets and carbon credit projects. Established markets are growing and creating the monetary value on Greenhouse Gases (GHG), on RECs, and other emissions, such as the SO2 and NOx allowance trading markets.
Below we share some of the key resources we use to monitor regulation, emerging markets and our clients' compliance strategies.
Under a regulated limit to carbon emissions (a "cap" on emissions), permits or "allowances" are given or auctioned to carbon emitters who then conduct business within this set limit. This creates a market for these allowances, where lower emitting entities can trade their extra allowances to those who need the additional capacity, hence the term "cap-and-trade" carbon markets.
In a voluntary carbon market, an entity or "emitter" volunteers to offset its carbon emissions by purchasing carbon allowances from a third party. The third party then invests this money in projects that reduce carbon in the atmosphere, such as planting trees (natural carbon sequestration) or investment in renewable energy, where this renewable capacity reduces fossil fuel use from traditional carbon-emitting energy sources.
Perhaps the most immediate revenue source from a corporate solar PV system are RECs mandated by state-level portfolio standards regulations requiring use of renewable energy by the utilities or load serving entities (LSEs) feeding the grid in those states.
A Renewable Energy Credit (REC) represents one megawatt hour (MWh) of renewable electricity generated and delivered somewhere on the power grid. A REC also represents the environmental benefits of replacing traditional, fossil-fuel power with renewable power. Markets put a value on the fact that for every MWh of renewable energy produced, there is one less MWh of power that is harmful to the environment.
Many corporate clients voluntarily support "green power" by buying the "green attributes" of renewable energy through a variety of 'retail' certification and verification programs:
Today public companies need to assure investors and regulators of their specific environmental compliance history, and policies and plans, as the institutional market has brought significant environmental criteria into their investment strategies and policies.
The International Organization for Standardization (ISO), the world's largest developer and publisher of international standards, has developed ISO 14000 – a series of international standards that incorporate environmental aspects into business operations and product standards.
The Environmental Protection Agency (EPA) is developing specific programs for emissions disclosure and compliance. With the EPA's Climate Leaders program, companies commit to reducing their impact on the environment with a corporate-wide inventory of their greenhouse gas emissions, setting aggressive reduction goals, and annually reporting their progress to EPA.
USGBC's LEED program (Leadership in Energy and Environmental Design) is the most prominent and recognized green building rating system, designed to set universally understood and accepted tools and performance criteria in the building/construction industry.