Positioning Your Business for the New Cap and Trade World

Whether corporate America likes it or not, government regulation of greenhouse gas emissions is headed our way. A cap and trade market is riding shotgun. But fear not, because with change comes great opportunity for businesses that realize they need to get smart about sustainability sooner, rather than later.

Part of the Climate Bill, which is expected to pass in the near future, calls for a cap-and-trade system. This system demands that companies which have facilities that emit greater than 25,000 tonnes of carbon per year reduce their emissions below a required level. These companies will have the option to either make the actual emission reduction or purchase offsets or credits from other businesses which have reduced their carbon emissions. The result will be the development of a multi-billion dollar market for carbon offsets and allowances. A byproduct of the carbon market will be a robust market for energy efficiency credits (White Tags) and renewable energy certificates (RECs). There are many revenue opportunities that come along with these sellable credits.

A company’s facility that is already below the 25,000 tonne mark and not regulated, which the significant majority are, will have the option to make emission reductions, and then register and verify those reductions to sell them to those companies that must meet the government’s emissions reduction standards. There are further opportunities in the area of renewable energy. On-site renewable energy projects translate into tradable RECs. These can produce an income stream that contributes to the cost of the project.

It’s a great opportunity for additional cash flow-”a financial incentive to green your business.

Addressing sustainability and carbon footprint
It’s not too soon to start thinking about how your business can take advantage of these opportunities and see the financial gain. There is no doubt that green is here to stay, and that in the long-term, business operators will have to take sustainability into consideration with every decision they make. With cap-and-trade markets now in our foreseeable future, it’s time to address sustainability at your own business, and position yourself to benefit from the legislation headed your way. The most successful businesses to enter these burgeoning markets will be those who got an early jump.

If you want to be a player here, you must start by examining your business’s energy consumption profile and calculating the size of your carbon footprint. Because it can be an overwhelming process, many companies have enlisted the help of energy management consultants. These consultants will help you to navigate the world of carbon footprint measurement and reporting. They have expertise in tracking carbon emissions at an enterprise, state, group or site level. They’ll also help you with the following, often complicated, tasks: allocating carbon emissions to the appropriate sources; determining carbon dioxide equivalent (CO²e) emissions based on the source; using site or operational characteristics to measure emission intensities; establishing a baseline year to measure progress towards goals; and tracking carbon offsets to fully understand your net carbon position.

Once you’ve developed this profile, these same consultants will make recommendations about where they see opportunities to reduce your emissions, be it in your facility operations or with a renewable energy procurement strategy. As you make these improvements, they’ll report back on what sort of dent you’re making in your carbon footprint. That dent, or your carbon reduction, is what you’ll take to the market and then add to your bottom line.

Not every company will be prepared to gain from the new markets that will develop when the Climate Bill passes into law, but by getting an early start, you could be one of smart ones who saw the opportunity, and jumped up to grab it first. Don’t wait to see how it all shakes out. Shake things up instead. Put “shrink my carbon footprint” at the top of your to-do list and think about where you want to reinvest your new found cash flow.

George Kehler is the director of Sustainability and Carbon Management for Advantage IQ, a provider of expense management solutions for multi-site businesses, offering a wide range of customized services that enable companies to monitor, measure, and reduce operational expenses. He can be reached at [email protected].