Incenting Business…Impacting The Environment

What is Carbon Intensity?

Carbon Intensity (CI) is an energy industry term used to describe businesses that emit more than the governmental standard defined as “acceptable” carbon emissions. Large firms with high levels of (CI) must work toward achieving acceptable standards... or face vast fines. Without credits, the cost of achieving designated CI targets becomes huge. Firms may choose to simply incur fines because they cannot afford to make sizable investments all at once…or they may purchase CI’s on the open market. Credits allow the required changes to be phased in…over time.

Purchasing CI’s from innovative “green” renewable-energy companies provides otherwise costly early-stage growth capital. This results in resolution of the large energy giant’s ability to come into compliance, without the huge capital outlay of installing expensive carbon-reducing energy technology immediately…allowing for the required cap-ex to be spread over a digestible timeframe, while concurrently providing the start-up the growth capital needed as the buyerof carbon credits invests, of course, with an appealing ROI as a backdrop. Given the new Trump Administrations tax incentives, there may well be additional tax incentives to be enjoyed for the investor.

What Are Carbon Credits and How Do They Work?

A low-carbon fuel standard (LCFS) is a rule enacted to reducecarbon intensity in transportation fuels as compared to conventional petroleum fuelssuch as gasoline and diesel.

Producers of fuels with a Carbon Intensity (CI) under the annual cap earn credits, while producers of higher-carbon fuels like gasoline and diesel incur deficits and are required to buy offsetting credits to meet the annual average CI value…or upgrade equipment that diminishes their carbon footprint.

Those in-need of carbon credits can purchase additional emissions credits from organizations who are already under their carbon intensity (CI) target, resulting in “fueling” the alternative energy start-ups company’s growth…and meeting the challenge energy giants face in obtaining CI targets.

On the other side of the equation, firms who are already under their CI targets have credits to sell. These organizations have incentive to make continuous improvements to their processes, becoming ever cleaner and more efficient, thus reaping the economic benefits of unused credits. Both sides of the exchange benefit from this element of the LCFS legislation...thus making it one of the more successful carbon programs the United States has seen in recent history.

The Carbon Credit “STOCK MARKET”

Buying and sellingcarbon credits is a relatively straightforward process and can be compared to buying and selling shares in a publicly traded stock. Like a stock exchange, physical assets normally changes hands. As in the case of a publicly traded stock, if you have access to the right people to such transactions are relatively straight-forwarded.

Doing Well by Doing Good

Investing in new technologyis one method organizations might leverage to meet their targets. Electric vehicles, adopting alternative and renewable fuel types, optimized supply chains, and more fuel-efficient modes of transportation are all viable examples. Additionally, investing in alternative fuel programs allows shippers to capitalize on growing incentives from the LCFS program. Most importantly, businesses with green technologies will have carbon credits to sell in the “market” thus allowing them to use the proceeds to fund their growth or even launch their innovative business.

Note: akceler8, Inc. is a Chicago/Newport Beach, CA based consultancy that brings together companies in need of growth strategies, marketing, C suite mentoring and capital to foster growth.