The Background By 2020, the UK will need to replace roughly one out of every four existing power plants, due to aging condition and the inability to meet environmental safety regulations. Because of this the Government is committed to providing a low-carbon transition plan and alternative sustainable energy sources. For the UK to enable a secure, low-carbon transition in the power sector, the Government believes there is a strong rationale to provide support for and certainty on a carbon price floor.
The UK will essentially be the first country to present a carbon price baseline, which will help to drive funding of eco-friendly renewable energy alternatives, as well as nuclear power. The move should also benefit investors, as the carbon permit floor (set to be introduced in early 2013) will start at £16 a tonne and will increase to £30 a ton in 2020. Banks have already signed on to provide extra funding for the initiative, by leveraging private capital investments which will make the outlook and returns more favorable for the market as a whole.
In the short to mid-term, the UK Government recognizes the concerns that implementing a carbon price will likely drive the wholesale electricity price up; however, they also predict that electricity prices are likely to be even higher in the long-term if there is continued reliance on limited fossil fuels resources to power the country in the future when, at the same time the county is under pressure to meet their carbon reduction targets. Therefore, the Government has an immediate concern and is committed to accelerating the funding and forward movement of such an initiative in the coming years.
From an overall investment perspective, the UK requires upwards of £200 billion of capital by the year 2020 to secure its goal of a low-carbon energy future. These funds will help to ensure access to a safer and more secure supply of clean energy resources, as well as play a pivotal role in reducing greenhouse gas emissions and lowering the carbon footprint of energy production. The effect of developing new low-carbon technologies will in turn boost overall economic feasibility by providing new jobs.
What are Carbon Credits and Why Invest in them? CERs (Certified Emission Reductions) are currently one of the most actively traded products on the carbon market. They represent the abatement of one tonne of carbon dioxide, after being verified under the UN’s CDM (Clean Development Mechanism) regulations. The CDM is designed to enable developed nations, such as the UK, to invest in emission reduction projects in poorer countries, in exchange for carbon credits that can be used to meet that country’s emission goals. These carbon credits are known as CERs.
Purchasing CERs gives investors the opportunity to become a part of a market that is involved in the investment of developing nations, for the purpose of adopting cleaner energy sources and more efficient industrial processes to accelerate sustainable development and benefit the environment on a global basis.
The CDM provides a cheaper alternative to reducing emissions internally and also provides a tax incentive to host countries that can use the funds for local adaption to climate change.
Currently, the $120 Billon Certified Emissions Market holds the backing of over 190 governments and is overseen by the European Commission and the UNFCCC (The United Nations Framework Convention on Climate Change). The Market has flexible exit strategies including government auctions and direct market access (DMA). Countries that are already committed to the Certified Emissions Market include Australia, which is set to purchase 520 Million CERs and South Korea, who is set to purchase 120 Million CERs, both by 2020.
The credits provided are offered by an FSA-regulated UK company and are Phase III prepared green credits. These credits allow for changes already implemented as well as those already in the pipeline within the compliance market. Live credits can be traded at any time, including during Phase III (of the Kyoto Protocol).
Clients deal directly with a respected UK big-four bank, making contributions to an FSA-regulated supplier. All CERs are held on the European Union Commission registry account.
Investors should be aware of the difference between fully issued live emission certificates and the option of buying into a project which is more speculative and carries a significant delivery risk with the possibility that the project may not be verified under the CDM at all due to the increasingly stringent CDM standards and new regulations such as the removal of all industrial gas credits from the market (currently 70% of the total marketplace).
Investors should be activley encouraged to research the market and make comparisons in order to make an informed decision. Live, Phase III prepared green credits are at a lower cost and higher value, enabling the best future trade out with a minimum of risk.
Our company specialises in emission opportunities including carbon offsetting and alternative and socially responsible investments. We assist clients who wish to participate in the green marketplace by introducing the best carbon products to offset their emissions, or to hold for future trading purposes, with the knowledge that these investments will also benefit the environment. The emissions market is projected to grow to £1 trillion by 2020 and it is our aim to assist anyone who would like to be a part of this exciting new market without pressure or obligation. With current market predictions, clients are on track to receive 15-18% profit over a 2-5 year timeframe.