Carbon Credits Utility

Carbon Credits Utility

Essentially, carbon credits are an artificial way to create a market for supply and demand for carbon credits. Based on the rules of the Kyoto Convention, GHG emitters (usually large industries, i.e. fixed resources) are granted a series of permits to emit, which is supposedly less than their average annual greenhouse gas emissions.

In practice, if a company receives a permit to emit 100T CO2 (tons of CO2), but needs to spend 150T CO2 to maintain its operations, consequently, it will have to buy 50T CO2 in Carbon Credits from someone authorized to emit them — in this case, us! Importantly, once an organization or an individual has purchased a carbon credit, the credit is permanently retired, so it cannot be reused, only the owner (who owns it) can be changed through an exchange or transaction.

In addition, it is important to mention that the company is not required to buy the credits, it also has the option to reduce its GHG emissions, which is usually not its preferred choice. Also, a notable thing is that permits for large industries are decreasing every year, which means that the demand for Carbon Credits will intensify in the coming years.

Prices for 2021 were expected to hover around $0.40 before doubling by the end of this decade, which has already been surpassed en masse. Keeping all of the above in mind, it is relatively easy to come to the conclusion that demand is something that is not lacking in this market. The issue of supply and competition will be discussed a few pages down in this whitepaper.