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Redesigning American Businesses to become Earth Positive

Welcome to Origin Report #5

This report covers:

  • Earth Appreciation Photo of the Month
  • Article: Why Carbon Markets are Key Tools for the Climate Transition
  • Climate Tool Box

Earth Appreciation Photo of the Month

The Lone Cypress. – Pebble Beach, CA

Why Carbon Markets are Key Tools for the Climate Transition

“Try not to become a man of success, but rather try to become a man of value.” – Albert Einstein

The same could be said for business.

If you are a professional pursuing sustainable business, carbon markets are essential to understand. They are fairly immature relative to other markets that we know of today, but as businesses, governments, and institutions begin to act on their climate action plans,

Carbon markets will serve as valuable tools to create and drive more value for your business.

So what is a Carbon Market and how do they work?

A carbon market is a place where carbon emissions and reductions are traded. Carbon credits is a medium that is exchanged and is issued through third party certified emission reduction projects and each represents one tonne of CO2.  Credits can be earned, purchased, held, or sold for organizations to meet their net-zero goals.

There are two types of carbon markets that exist today, but are built on the foundational idea of the carbon credit, which was originally created in the Kyoto Protocol (1997) and led to the Clean Development Mechanism (CDM) that was later developed by the United Nations. The two types of carbon markets are:

  1. The regulated cap and trade market (i.e. compliance market), which includes California’s cap and trade system (fun fact: This is the only cap and trade system in the United States).
  2. The voluntary market, where buyers can purchase “carbon credits” to offset their emissions.

Carbon credits are issued through the lifecycle of the carbon removal project, then are retired when the carbon credit reaches maturity and the carbon is verified to be removed. These credits carry financial, environmental, and social value, which in turn drives growth and value in your business.

Where is the opportunity in carbon markets?

Carbon markets provide an opportunity to earn carbon credits and accelerate progress to net-zero. Adapting now, will lead to competitive advantages especially if governments continue to set net-zero goals. In fact, in September 2023, the Security and Exchange Commission (SEC) proposed a rule that would require climate disclosures. The bottom line, sustainable development can drive growth, but there are a few ways to do this.

  1. Earn customers by reducing and offsetting your carbon footprint and open opportunities to be suppliers of net-zero products and services
  2. Diversify your revenue streams to government purchases, there is a current Federal Acquisition Regulation (FAR) case pending on Sustainable Procurement (Case No. 2022-006) which would solidify Executive Order 14057 that will require agencies to consider various social costs in purchasing. This could be a HUGE competitive advantage for firms that are already ahead of tracking carbon emissions and sustainability metrics.
  3. Develop emission reduction projects to cover your emissions and sell excess for revenue
  4. Reduce your interest on debt through ESG financing loans
  5. Increase the value of your business and solidify competitive advantage by achieving net-zero

How do business leaders and investors participate in carbon markets?

Before participating in carbon markets it’s best to have:

  1. A climate action plan
  2. Established carbon accounting mechanisms
  3. Determine a method to evaluate opportunities, strategies, and partners

To engage carbon markets businesses can:

  • Develop or invest directly in an offset project
  • Use an emission reduction agreement to purchase credits from a project developer
  • Purchase credits through exchanges or retailers, however not all carbon credits are created equally so its recommended to complete your due diligence and check out carbon credit rating companies.

In conclusion, carbon credits play a key function of the global climate puzzle and leveraging them will be key in accomplishing net-zero. As always, at Pike Origin, our team is here to help you define and execute on your climate strategy, please don’t hesitate to contact us.

The Climate Toolbox

Shared Language – Definition of Net-zero

Useful Tool of the Month – Pike Origin’s Carbon Market Directory

Cheers,

Chris