By Johannes Kotilainen
News spreads quickly these days, customers demand responsibility and companies that do not address this lose reputation and sales. Ethical practices are being demanded both by consumers and governments. Regulations tend to be based off what growing populations are concerned about. Carbon limits are one of these regulation requirements. Governments have placed limits on the amount of emissions (CO2, NO2, SO2 the greenhouse gases we hear so much about) a company can produce. Industry has a set emission quotas based off production that is allowed. Producing above this quota results in a fine. Carbon offsets are a traded commodity that represents a reduction in carbon emissions, usually one offset representing one ton of CO2. When a company goes beyond the set reduction they create these carbon credits, as opposed to going over the quota and being fined.
Companies can go about meeting these regulations by improving methods to lower emissions, creating new methods, or sourcing energy from a cleaner source. In some industries these are easier to achieve than others, and carbon offsets provide a way for industries to meet regulation when they could not otherwise afford to implement the changes required to lower emissions.
Trading carbon offsets encourages companies that can easily lower their emission to do more than just the required target reductions, as the excess offsets can be traded and create a secondary revenue stream. This also gives the heavy polluters the ability to purchase the offsetting capabilities of another company. Smart companies set aside a percentage of the revenue generated from the sale of offsets into a fund for even more sustainable practices that can lower emissions that otherwise would be too costly despite a strong ROI. This creates more offsets to sell, giving a real financial case and framework to lower emissions and tap into a growing market.
READ ABOUT A PROMISING CANADIAN COMPANY IN THE CARBON OFFSETTING SPACE >>
Find out why sustainability is important in business and investing: http://www.smallcappower.com/posts/why-sustainability-is-important-in-business-and-investing-johannes-green-investing
Do you wish to share your knowledge of a particular stock in 300 words or less? If so, please send your submission to sean@smallcappower.com and you could have your article published on Small Cap Power!
Disclaimer: This article was posted with the permission of a third-party contributor and the opinions contained therein do not necessarily reflect those of Smallcappower. Smallcappower does not endorse any investment advice provided by these third-party contributors.
Please consult your investment advisor before making any investment decisions. Ubika Corporation and its divisions Smallcappower, Ubika Communication and Ubika Research are not registered with any financial or securities regulatory authority in Ontario or Canada, and do not provide nor claims to provide investment advice or recommendations to any visitor of this site or readers of any content on this site. – See more at: http://www.smallcappower.com/posts/small-cap-power-disclosure
