Environmental Commodity Markets 101
An introduction to emissions markets.
September 29, 2020
Radicle helps companies navigate emissions markets to turn a profit while protecting the planet. So far, we’ve created more than five million tonnes in compliance-grade emissions offsets and our team has transacted over $300M of environmental commodities globally. While big numbers are impressive and set the stage for the impact we hope to have, let’s start with some basics, like what environmental commodities are, and how emissions markets work.
Let’s begin with the basic environmental commodity types: carbon credits, renewable fuels, and renewable electricity. Companies earn carbon credits by reducing the amount of greenhouse gases (GHGs) they generate, or by storing them before they enter the atmosphere, and every individual carbon credit represents one tonne of carbon dioxide equivalent (tCO2e). This concept extends to methane, as well. In fact, methane has around 30 times the global warming potential (GWP) of CO2, making methane emissions reductions even more critical to our cause. Renewable fuels and electricity form different types of credits based on the specific rules of the jurisdictions they’re created and sold in. These credits can be based on a per tCO2e or on units of production, like megawatt hours (MWh) of renewable power.
Environmental commodity registries certify and track credits, and regulate how they’re created. They’re a lot like stocks and bonds in this way – some are like blue chip investments (cha-ching!), while others are mostly worthless. Radicle generates environmental commodities of the highest quality and value because we use our own software platform to measure, qualify, and aggregate your GHGs. So, when it comes to buying and selling credits in emissions markets, our clients are poised to profit.
When we talk about emissions markets, these can largely be broken into two categories: compliance and voluntary. Compliance markets are for companies required to meet governmentally mandated targets at the risk of facing financial penalties, whereas voluntary markets are for those opting to reduce emissions or commit to greener solutions on their own accord. Usually this is done either to meet their own environmental commitments or supplement their revenue.
We know all this can sound pretty complicated. “The devil is in the details,” says Chelsea Bryant, Managing Director, Global Markets & Strategy at Radicle. “It’s mission-critical to do your homework to optimize the value – revenue generation or cost savings – from market participation.” And at Radicle, we’ve done our homework. We’re eager to assist organizations of all levels of familiarity with navigating the complexities of environmental commodities and emissions markets to facilitate broader engagement in them.