A Complete Guide to Selling Carbon Offsets
Updated: Jun 15, 2022
Homeowners and businesses are often sold the energy generation benefits of solar and wind installations. Reduced energy bills. Less CO2 emissions. Climate-friendly. These upsides are all fantastic! However, there's another way to generate money from your renewable energy system: selling carbon offsets.
Whether you're a homeowner, small farmer, school board, or municipality, selling carbon offsets is a simple yet effective way to earn money from existing solar panels and wind turbines.
In this complete guide to selling carbon offsets, we'll explain what they are, how they work, and how you can start earning a sizable income through your renewable energy system.
What is a carbon offset?
Before you can start selling carbon offsets, you need to know what they are.
Carbon offsets are a certificate or right produced when CO2 is removed from the atmosphere or prevented from being emitted. The former might involve tree planting or advanced extraction technologies; the latter includes technologies such as renewable energy generation.
Because the carbon offset is created when CO2 is not emitted, it can be traded with somebody to allow them to emit an equal volume of CO2 – thereby resulting in a carbon-neutral transaction.
Here's the rule: 1 carbon offset credit is equal to 1 metric tonne of CO2 emitted (CO2e).
It's a clever market-based system encouraging a reduction in overall CO2 production. Because certain provincial governments require businesses to reduce emissions over time, purchasing carbon offset credits means they can meet their targets. Conversely, selling carbon offsets increases the benefits of renewable energy generation.
Selling carbon offsets is a well established market
Selling carbon offsets first began under the 1997 UN Kyoto Protocol. Since their introduction, they've seen significant popularity as a tool to encourage GHG emission reductions and have been introduced in various countries and provinces/states across the world.
Governments worldwide are setting a carbon price for every ton of CO2 released over a particular threshold to reduce net emissions. It's intended to spark emissions reductions, and in many jurisdictions, the new regulations go hand-in-hand with carbon offsets.
In Alberta, Canada, the Provincial government regulates the price of "Fund Credits". This acts as the ceiling price for carbon – currently at $50. The Federal government in Canada has announced plans to increase this by $15 every year until 2030 and it’s likely Alberta will have to do the same to maintain equivalency of regulation. Selling carbon offsets isn't equal to Fund Credits, however. You'll typically find the carbon offset price around 80 to 95% of the Fund Credit price; in 2022, that's about $40 to $47.50, depending on market supply and demand.
Who buys carbon offsets?
There are two types of carbon markets:
Compliance carbon markets, AND
Voluntary carbon markets.
Compliance carbon markets - like the one in Alberta - operate because of a government mandate to reduce emissions. When companies hit their emissions cap, they avoid paying the higher carbon price by purchasing carbon offsets, thereby funding emission reductions elsewhere in the economy, such as by incentivizing renewable energy production.
For example: Company X is limited to 500 tonnes of CO2 annually. However, they find they emit 600 tonnes of CO2. To cover the 100 tonnes difference, they purchase 100 carbon offset credits, ensuring they meet the threshold.
Voluntary carbon markets, on the other hand, are - as their name suggests - wholly optional. In these cases, companies and individuals purchase carbon offset credits to reduce their environmental impact, either to reduce their emissions or to go carbon-neutral.
For example: Company Y emits 300 tonnes of CO2 annually. By purchasing 300 carbon offset credits, they meet their net-zero emissions targets. They can then report this to their investors, their staff and their customers.
Selling carbon offsets: Who can do it?
Technically – anyone. You just need to be undertaking a voluntary emission reduction. So if you're generating renewable energy, this could be for you.
However, because the government strictly regulates the system – to ensure the emissions reductions are real – creating carbon offsets is a complex and bureaucratic process with many rules that must be followed.
The expertise and cost required to create carbon offsets has meant that while large Alberta companies - such as utility-scale wind farms - have gotten paid to reduce CO2 emissions since 2007, smaller renewable producers have missed out.
That's where SOLAR OFFSET comes in.
By banding together small renewable producers throughout Alberta, SOLAR OFFSET can meet the regulatory requirements and overcome the cost barriers to creating and selling carbon offsets. Meanwhile, producers focus on their solar and wind systems.
It's an ingenious way to open the carbon market to producers across the province, from homeowners to school boards.
The future of carbon offsets
We know the federal government is fully behind the carbon offset market - with the federal market launching June 2022 - and has stated that it will raise the price of carbon steadily to $170 by 2030. This in turn is likely to translate into a higher price in Alberta, as the provincial government needs to demonstrate that its own regulations are as strict as the Federal ones.
If you want to earn money from your Alberta-based solar or wind installation, please visit our sign up page and complete our easy form to find out your eligibility and receive an estimate of your potential revenue.
To learn more regarding SOLAR OFFSET, please visit Solaroffset.ca.