Green markets in the United States consist of the following: green power, renewable energy certificates (RECs), verified emission reduction credits (VERs) and greenhouse gas (GHG) compliance units. Each market is in a different stage of maturity and offers different opportunities for retail, wholesale, and government participants. Green Power. Because the US is currently not party to any binding national or international regulations concerning GHG emissions reductions or green energy commitments, the market for domestic green power is driven largely by factors based on state regulatory requirements, economic considerations and social responsibility concerns. From a regulatory perspective, 27 US states plus the District of Columbia currently require local power suppliers to comply with renewable portfolio standards (RPS) and a few other states have voluntary goals. Additionally, some government and other buyers are also required to purchase green energy. Economically, producers are responding to the growing demand for green power, which enables premium pricing, while buyers are attracted to the lower price volatility of green power. Finally, buyers from all sectors are pursuing green energy based on perceived superior performance from environmental, human health, and/or energy security perspectives. Renewable Energy Certificates. A renewable energy certificate (REC) is the monetization of one kilowatt hour of energy derived from renewable sources. These certificates are earned through the development of renewable energy projects and may be sold to organizations looking to increase their green energy consumption or to comply with renewable portfolio standards (RPS). Buyers in the US REC markets, then, are driven by the same regulatory , political and social responsibility factors noted above – while sellers are either renewable energy suppliers or aggregators/brokers who seek to capture value from the premium that the market assigns to green power. At present some states allow producers to sell the energy produced as a separate commodity from the certificates earned, others do not allow this "unbundling," considering the energy and certificates to be two parts of the same product. Verified Emission Reduction Credits. Verified emission reductions (VER) are tradable credits generated to meet the voluntary demand for carbon credits by buyers seeking to offset their own emissions. In essence, “verified emission reductions” is an interchangeable term for carbon offsets, and they are traded solely in the voluntary carbon offset market. Many different types of projects are funded through the voluntary purchase of offsets; however, projects pertaining to land use and forestry are particularly common. The demand for voluntary carbon offsets comes predominately from two sectors: wholesale buyers and retail buyers. Wholesale buyers are companies seeking to reduce GHG emissions for reasons pertaining to social responsibility, public relations, company image or the anticipation of future regulatory requirements. In 2006, wholesale buyers dominated the market — purchasing over 60% of voluntary carbon offsets sold. In contrast, retail buyers are comprised of smaller organizations and individuals seeking to offset GHG emissions for which they are personally responsible. By 2011, the global voluntary carbon offset market is projected to reach a size of 400 million tons (World Resources Institute). Greenhouse Gas (GHG) Compliance Units. In the absence of a national policy, several states and regions in the US have decided to take action to limit GHG emissions. Ten Northeastern states have formed the Regional Greenhouse Gas Initiative (RGGI), and will begin auctioning emissions allowances in late 2007. California has enacted legislation to regulate GHG emissions, and is in the process of determining the mechanisms through which to implement the mandate. Additionally, the Western Climate Initiative (WCI) has adopted a regional GHG reduction goal of a 15% reduction below 2005 levels by 2020. Commodities
Within these markets, the World Green Exchange conducts transactions for the following green commodities: - Green Power
- Renewable Energy Certificates (RECs)
- Verified Emission Reduction Credits (VERs)
- SO2 and NOx
- Regional Greenhouse Gas (GHG) compliance units
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