If you don’t fully understand what carbon offsetting is then you probably should. It’s become big business and companies such as Offsetters Climate Solutions (TSXV: COO) are beginning to reap the rewards.
In a nutshell, this is how carbon offsetting works: Governments set emission target regulations that companies must meet or be charged for failing to meet that regulation. Companies can go about meeting these 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. Carbon offsets, then, provide a way for industries to meet these regulation when they could not otherwise afford to implement the changes required to lower emissions.
Canada’s largest provider of offset solutions is Offsetters Climate Solutions Inc. (TSXV: COO). SmallCapPower.com recently spoke with its President and CEO James Tansey, who provided a clear explanation of how this offset system operates:
“A carbon offset is a way for a company to meet its regulatory obligations, and so the regulator may say to a cement plant: you need to reduce your emissions by 10 or 15 percent. If that’s challenging for the cement plant… they make an investment and they purchase emissions reductions… They pay, let’s say, $15 a ton to do that and it’s cheaper for them to buy that offset than it is for them to reduce the emissions in their plant and they still comply with what the regulator requires of them.” (Watch the smallcappower.com interview HERE).
Based out of Vancouver, British Columbia, Offsetters Climate Solutions (COO) provides carbon disclosure reporting, offset project development, water foot printing, renewable energy and energy efficiency, and carbon finance. These services provide both measurable cost reductions solutions, as well as better brand traction and consumer approval for their clients. To date they have developed and sold over six million offsets and have provided solutions to offset the 2014 Sochi and Vancouver 2010 Olympic games. Current large clients include Vancity, Shell, Dow, Lululemon, The Canadian Olympic Committee, and The Government of Canada.
Keep up to date with breaking news, commentaries, and interviews by following Offsetters Climate Solutions here.
COO is benefitting from these relationships in more than a few ways. First, the company develops new projects and acquires third-party validation, turning the emission reductions into a commodity to sell. COO provides long-term (10-15 year) offset solutions at a set rate to emitters in order to meet emission targets, which results in a guaranteed revenue stream for the company. Another revenue stream stems from licensing its sustainability software that was developed by COO to track emissions and ecological assets. One of these is the first ever software platform for essentially an ecological asset bank.
On the financial side, COO reported 2013 revenue of a little more than $7 million yet it has a market capitalization of just $1.7 million based on its most recent stock price of $0.06 and its 30.7 million shares outstanding. As of September 30, 2014, the company had about $600,000 in cash, which is about one third of its market cap.
To learn more about Offsetters Climate Solutions, you can view their initiation research report, and CEO video interview on their SmallCapPower.com Investor Hub here.
About Offsetters Climate Solutions Inc.
Offsetters is Canada’s largest and most diversified carbon management solutions company. Its team of industry leaders specializes in the origination, development and commercialization of high-quality carbon offset projects, and through a comprehensive offering of sustainability consultancy services Offsetters helps organizations understand, reduce and offset their climate impact. A combination of ERA Carbon Offsets, Offsetters and CCC, Offsetters is based in Vancouver, Canada and has worked with over 150 leading business organizations including Aimia, Vancity, lululemonathletica, Catalyst Paper, Harbour Air, HSE – Entega, and Shell Canada Limited. For more information, please visit www.offsetters.ca.
Disclosure
Ubika Research has received compensation from Offsetters Climate Solutions to provide analyst research coverage. For full disclosure please visit here.
About Ubika Research
Ubika is an investment research and capital market services firm based in Toronto and Vancouver with a proven track record of identifying and launching coverage of high potential small cap stocks at an early stage, thus offering timely market insights. Its specialty is small-cap companies with a market capitalization of <$5 billion.
