July 31, 2014

Carbon Credits

Swapping Carbon

Florida businesses dabble in voluntary carbon-trading markets.

Energy Generation by Fuel Type in Florida

2007 (Actual)

? 2017 (Forecast)
Natural Gas 39% ? Natural Gas 54.4%
?
Coal 29.3% ?
? Coal 23.7%
Other 13.3% ?
? Nuclear 16.0%
Nuclear 11.9% ? Other* 4.9%
Oil 6.7% ? Oil 1.1%

*Other includes petcoke and hydro | Source: Public Service Commission

Companies also run the risk of spending money to change their operations to offset carbon only to find they can’t get enough from selling the credits to justify that cost. "Once you create these credits, you still have to market them" at a reasonable price, says Michael Wallandar, an attorney with Greenberg Traurig’s carbon credits group.

By far the biggest problem at this stage is uncertainty, especially of carbon-credit prices. On the Chicago Exchange, credits have sold for as much as $7 per metric ton, but this past summer prices never rose above 40 cents a ton. Most recently they’ve sold for about 20 cents a ton.

Earlier this year, Highlands County economic development officials and the University of Florida’s Institute of Food and Agricultural Sciences hosted a carbon-credit workshop for farmers eager to learn how to sell carbon credits. The 75 who showed up got a lesson in how enormously complicated it is to figure out the carbon footprint of their operations. Exchanges like CCX require businesses that want to join to calculate everything from nitrogen input to every drop of diesel fuel they use — a process that’s complex and expensive.

"When a carbon credit today is trading at no more than $3, what good is all that?" asks Dan Murphy, executive director of the Highlands County Economic Development Commission. "Looking forward, if they are selling for over $100 or $150, that would be a different story."

At the Florida Farm Bureau, Andrew Walmsley, assistant director of agricultural policy, recommends to his members that they stay on the sidelines, at least until they’ve educated themselves thoroughly in the world of carbon. "The credits fluctuate so wildly, how do you plan as a businessperson?" Walmsley asks. "There is so much uncertainty in this that at this point, it’s kind of like the wild, wild west."

For now, the carbon game is difficult to play, and the potential winnings are minimal. Some experts advise businesses just to stand pat until a government-mandated market forms.

"Everybody wants to believe that there’s easy money out there, but there is no such thing," says Kury. "You really need to know what you’re doing."

growing
the oranges
60%

Orange Juice

transportation 22%

packaging
15%

disposal 3%

Counting Carbon

64 ounces of juice
= 1.7 kilograms of carbon

Measuring a company’s "carbon footprint" is a complex effort that involves adding up how much carbon is generated by each aspect of its production process. Columbia Earth Institute worked with PepsiCo, owner of Tropicana orange juice, on evaluating the carbon footprint of a carton of orange juice. Ultimately, they calculated, producing 64 ounces of orange juice generates 1.7 kilograms of carbon. The illustration at right shows how the company broke down the impact of each aspect of production.

Tags: Politics & Law, Energy & Utilities, Environment, Government/Politics & Law

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