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First Carbon Credit Corporation The Market, Past, Present and Your Future

Strong Market Forces

FCCC continues to stay up to date on new offset markets and opportunities as they develop across the globe.

The North American Market Place

The marketplace for carbon emissions trading in Alberta, Canada was established as a result of the Emissions Management Act (2007) and launched into action in July of that year.  This created the first compliance marketplace in North America that compelled over one hundred corporations, operating and emitting more than one hundred thousand tonnes of C02 annually, to reduce their emissions by twelve percent annually. To date this market approach has reduced GHG’s in Alberta by following protocols approved by the Alberta government. Alberta represents almost 70 percent of Canada’s total annual emissions. To find out more about this program, including the significant reductions achieved to date and recent developments, go to: http://environment.alberta.ca/01838.html.

In North America there are certain American states and Canadian Provinces involved in the Western Climate Initiative which was created in February 2007 with the long-term commitment to reduce regional GHG’s and fights climate change by focusing on a market-based cap and trade system. The WCI Partner jurisdictions have developed a comprehensive initiative to reduce regional GHG emissions to 15 percent below 2005 levels by 2020 and spur investment in and development of clean-energy technologies, create green jobs, and protect public health.

To find out more about this program, including partners information on the program design and recent developments, go to: http://www.westernclimateinitiative.org/index.php.

A cap and trade system uses market principles to reduce GHG emissions. The system works by setting an overall cap on the total amount of emissions that are allowed, and then lowering the cap over time to reduce overall emissions.

GHG emitters in the system are issued emission allowances that add up to the total allowable emissions for the large final emitter under the cap.

When emitters have excess allowances, they will be able to sell them to those that produce more emissions than they’re allotted. In this way, the cap and trade system uses the marketplace to reward efficiency and innovation; those that are most efficient will profit from reducing their GHG emissions.

Many non regulated sectors of our economy are low level emitters that could only be regulated by command and control techniques like a direct tax, so by developing an environmental best practice they can convert their low level emissions (source) activity into a reduction (sink) of their GHG emissions and benefit the environment and add revenue to their operation. Separate credits in such a system are granted to sectors like agriculture that voluntarily reduce or store emissions, and aren't subject to government climate change rules. These sectors can then convert their voluntary reductions into GHG compliance offsets that can be sold to a Large Final Emitter for their use in complying with government legislation as now is being done in Alberta.

Emissions trading systems have already been successful in the United States, Europe and New Zealand. As governments, industries and businesses worldwide move to reduce their emissions, trading will spur companies and industry to invest in or develop their own innovative clean energy technologies to stay competitive.

The International Marketplace

On a global level there is the International Carbon Action Partnership (ICAP), which is a partnership of countries and regions that are actively pursuing the development of carbon markets through the implementation of mandatory cap and trade systems with absolute caps. ICAP was established in Lisbon, Portugal on 29 October 2007 by Heads of national and regional Governments.

For more information and status go to: http://icapcarbonaction.com

Compliance and Voluntary Markets

Currently, most Compliance Market schemes are aimed at the Large Final Emitters (“LFE’s”), whereby these companies are legally mandated to comply with legislated specific GHG reduction targets.

Also, a Voluntary Market has emerged to facilitate open trading within and across legal, national and geographical jurisdictions, to accommodate the needs of environmentally and socially conscious corporations wishing to help mitigate the global GHG problem.

The Compliance Market for Alberta based Offsets is a restricted market in comparison to the rapidly expanding Voluntary Market for VCU’s.  The Voluntary Market offers significant opportunities to FCCC in that the trading of verified VCU’s has no geographical boundaries and is open to global trading.  Further, Tillage Protocols can be brought to bear in the Voluntary Market by opening up additional opportunities for the seller/producer to expand the number of GHG projects, allowing FCCC to sell the additional credits to a larger buying community.

A 2009 development in the Voluntary Carbon Standard (“VCS”) market allowed for the re-verification of Verified Emission Reduction (“VER”) credits and reclassification to Voluntary Carbon Units (“VCU”).   This allows FCCC to sell custom verified offsets to LFE’s outside of the Alberta compliance market.  Should FCCC secure VER’s it could reclassify them as VCU’s.  FCCC could also utilize these credits in the personal offsetting market.

The Voluntary Carbon Standard Association (VCSA) said it would allow projects hosted in Canada to issue offsets, known as Voluntary Carbon Units (VCU)”

Information taken from a news release on the international market Thursday, July 23, 2009 noted: “Under the VCSA’s new rules, Canadian-based projects can now issue VCUs without arranging for the Government of Canada to cancel an equal number of Kyoto Protocol units.”

“Before, projects in Canada wanting to issue credits had to demonstrate that they would not be double-counted in a Kyoto Protocol related program.” (This system is the practice used in the Alberta market with the credits earned under the tillage protocol; it is known as a compliance system.)

The VCSA’s rules allow VCU sales through custom protocols to an international market separate from the Alberta market. At this time FCCC is the only aggregator of agricultural offsets to have custom protocols allowing the creation of voluntary credits (resulting, for example, from the spreading of crop residue or the reduction of summer fallow). These VCU credit sales are generated in addition to any Alberta market place compliance credit sales.

FCCC uses several different consolidation methodologies where specific landowner operations become defined by individual GHG programs or specific GHG clusters.
Within each contract, FCCC works to ensure the maximum emission sinks are identified. It is also our job to ensure ownership of these sinks is available for us to ultimately sell on behalf of each contract.

FCCC will document, in detail, each set of formulas and protocols it applies to ensure we obtain a reasonable level of assurance as required by the ISO 14064 standard that we adhere to.

The Future of International Marketplace

The Carbon Market has been flourishing since 2005 and has experienced significant growth around the world. For more information and status of the world carbon market go to http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/ENVIRONMENT/EXTCARBONFINANCE and search ‘state and trends’.  

The World Bank’s annual review showed that the global carbon market grew in total value by 11% in 2011 to $176 billion, and that transaction volumes reached a new high to 10.3 billion tons of carbon dioxide equivalent. 

As legislation comes into force and existing offset systems improve over the next few years, in the various jurisdictions both in North America and around the globe, developing an adequate offset supply to meet the growing demand will become a major opportunity for FCCC.

Retail demand for voluntary carbon offsets will likely remain strong even if regulations place a national limit on greenhouse gas emissions, according to a survey conducted by researchers with the Appalachian State University Energy Center, the University of Alaska at Fairbanks’s School of Management and Environmental Credit Corp.

The nationwide survey, conducted during late 2009, asked individuals who buy retail carbon offsets about their purchases, their opinion on the environmental impacts of climate change, and how economic and environmental outcomes resulting from national greenhouse gas policy may affect their participation in the retail market for voluntary carbon offsets.

A carbon offset is a method consumers can use to reduce greenhouse gas emissions. For example, an individual can purchase carbon offsets from a retailer to reduce the emissions associated with their vacation –including carbon emissions from airline or vehicle travel. The ‘purchase’ helps finance renewable energy, waste management and agriculture projects that reduce greenhouse gas emissions.

“Consumers who purchase retail carbon offsets clearly understand the simple fact that using carbon-based energy releases greenhouse gases and results in environmental impacts that are cause for concern,” said Jason Hoyle, a researcher at the Appalachian State University Energy Center.

Survey results reveal a positive outlook for retailers of voluntary carbon offsets, even if a cap is placed on U.S. greenhouse gas emissions. If severe environmental impacts are projected to result from climate change, then about two-thirds of those surveyed would continue to purchase voluntary carbon offsets in the retail market even if regulations increased their household energy expenditures by as much as 25 percent.

It is clear that the demand for, and therefore, selling prices of voluntary retail emission credits will increase accordingly.
First Carbon Credits Corporation is well positioned to successfully take advantage of this growing phenomenon by operating in existing regional Green House Gas offset systems like Alberta and BC and soon other provinces, with a diversified portfolio of offset projects that utilize approved government protocols and meet the demand of Large Final Emitters under a corporate or Government compliance obligation.