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Carbon Credits Investments - Investing in Carbon Credits. Is it Safe to Invest in Carbon Credits? Trade Carbon Credits

Investing in Carbon Credits

The Kyoto Protocol, signed in 1997 and which came into force in 2005, was a massive landmark event in the fight to save the planet from the potentially catastrophic consequences of global warming.

One of the essential tenets of the Protocol was the radical measures it took with a view to systematically reducing the carbon emissions of the largest carbon producers, like electricity companies. Emission reduction targets were set for companies such as these, and those wishing to exceed those targets were compelled to purchase carbon credits on the market, the proceeds of which would be used to offset the negative effects of their activities elsewhere.

In the United Kingdom and Europe carbon credits are traded at the European Climate Exchange (ECX) in much the same way as other financial markets, although it should be noted that they are not commodities in the literal sense of the term but rather a legal construct. If there is any kind of risk factor involved therefore it is that as carbon credits are not a literal, physical commodity governments could in theory simply scrap them and thereby remove them from existence.

This is however an unlikely scenario. Global warming is high on everybody’s political agenda and is not a problem that is going to disappear without concerted action over a sustained period involving the entire international community. With the European Union resisting demands for more generous allowances to be issued, the value of carbon credits can only increase and that means those who invest now are likely to find themselves in an increasingly commanding position.

Investors can purchase carbon credits either on a “pre verified” or a “buy and hold” basis. A pre verified credit will mean that the project being invested in has not yet been verified and cannot be sold on until verification takes place. For this reason pre verified credits are generally available to investors at a lower price. It is important of course to ensure the terms of purchase are such that funds will be returned if accreditation is not achieved within an agreed time period.

“Buy and hold” credits on the other hand are already verified and therefore come with a lower risk attached, but naturally at a higher price.

Some investors have also directly leased rainforest for a set period, which has the dual benefit of doing something very positive and specific for the environment as well as providing an unusually generous return.

Unfortunately throughout the credits market there are a number of scams in operation and it is therefore essential to seek out some good advice from a reliable source before even thinking of investing any capital. Learn more about carbon credits at the above websites.

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