Key Players Quietly Building Carbon Market Infrastructure

Having to convince a dairy farmer about the benefits of commodities markets may seem strange, but Craig says often the biggest hurdle is overcoming the additional effort required to manage a project on an ongoing basis.

“Manure management is a huge issue for a farm,” she says. “It’s just that their [existing] system doesn’t regulate [greenhouse gas] methane. So you’re replacing one way of managing with another.”

Whether by allowance or offset project, once the carbon credits are created, carbon registries then come in, to manage the serialization, verification, tracking, trading and retirement of these carbon emissions. These registries also set the methodologies and calculation standards for various carbon projects.

AP

The “Big 3” registries include the Gold Standard, which focuses on renewable energy and energy efficiency projects; the Climate Action Reserve, which focuses on forestry and agricultural projects and the Voluntary Carbon Standard, which has over 100 methodologies covering many different project types.

Emissions in the three top registries make up nearly three-quarters of all American voluntary offset emissions in 2008, according to the Ecosystems Marketplace/ New Carbon Finance report.

“There’s really been a trend in the last year towards registry-based approaches,” says APX’s Musier, whose firm acts a clearinghouse of registries. “You’ve seen a flight to quality in the growth of the Gold Standard, VCS, and Climate Action Reserve."

Another ongoing need of a corporation generating credits includes credit verification. This  ensures all credits are complying with whatever standard is set by the registry. Typically this auditor-like role is the domain of accounting and consulting firms, both large—like KPMG and Deloitte—and small.

Then there’s a whole new group of service providers dedicated to managing the value of your emissions portfolio. While firms like TerraPass offer clients like Ford and American Express  one-stop, carbon-asset management, new emissions brokerages have sprung up to buy and sell carbon credits from offset projects. In this arena, pure emissions brokers, like White Plains-based Evolution Markets, vie with emissions operations of established firms, like Cantor Fitzgerald’s CantorCO2e group.

Often these firms piggyback on their expertise in existing emissions markets, like acid rain-related sulfur and nitrogen emissions that were the United States' first foray into a cap-and-trade market, or they become additional services on an existing energy or commodities desk.

Whatever route a management team chooses—to handle as much or as little of the project development and asset management role as they like and farm out the rest—clearing these hurdles with the right partners can provide a real carbon asset in the end.

With or without cap-and-trade legislation, there’s still a vibrant voluntary market if the carbon credits are solid, says APX’s Musier.

"If you have things buttoned down in a high quality registry-based standard, then there’s value in the credit and value in the marketing claim," he says.

© 2012 CNBC.com

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