Potential Buyers and Sellers of Carbon Credits

When we talk about the carbon trading market, we’re obviously going to have both buyers and sellers of carbon credits or permits. But who exactly are these buyers and sellers likely to be?

In the most basic terms, we’ll have:

Buyers of Carbon Credits - Businesses that are more emissions-intensive, which use up their allotted carbon credits, and that still have emissions needs that have to be satisfied by purchasing extra permits from others.

Sellers of Carbon Credits – Businesses that either aren’t emissions-intensive to begin with or those that have found it to be more cost-effective to decrease their emissions. These companies will have a surplus of carbon permits, which they can profit from by selling them to higher emission businesses.

Now let’s look at some of the industries that could be most affected by emissions trading schemes, and whether they would be likely carbon credit buyers or sellers:

Coal Power Plants

Coal generating stations are expected to be the hardest hit industry by trading schemes. This is because burning coal emits a great deal of carbon dioxide directly into the atmosphere. While not necessarily feasible to convert coal power plants into other energy-generating options, one hope is that coal will become a less attractive option economically, eventually leading to greater adoption of “clean power” around the globe.

Manufacturing Plants

Manufacturing plants exist in many different industries, and they can also be significant CO2 emitters. They would be another likely candidate for having to purchase additional carbon credits over their initial lot.

Airlines

Transportation-intensive industries such as the airline industry may also be likely to end up purchasing additional carbon credits.

Agricultural Land / Forests

Forests and agricultural land may actually result in carbon deposits (for example, the carbon stored in trees after being pulled out of the atmosphere), which will allow the owners (either private or governments) to sell carbon credits. This is an income source that can be attractive for developing countries who may find it more profitable to preserve natural rainforests or other habitats than to move into industrial development.

All businesses will have the incentive to decrease their own emissions in order to either make money (by selling credits) or save money (by having to purchase fewer credits). That’s the fundamental idea behind the carbon trading scheme itself – give polluters a two-fold reason to rethink their greenhouse gas contributions to the atmosphere.

Last updated 22 September 2008