How Small Businesses Can Leverage Environmental Commodities

 
06/14/2021

The Biden Administration is planning to achieve 100% clean electricity by 2035 nationally. Approximately 40 percent of the clean financial funding will focus on disadvantaged communities and small businesses.
 
Small business owners can take advantage of this directive -- and its accompanying incentives -- by trading environmental commodities. These credits can assist small businesses as well as their communities.
 
This article describes the ways that minorities, women, veterans, and other small business owners can boost their bottom lines by participating in the environmental commodity markets.

What Are Environmental Commodities?

Environment commodities are non-financial, physically settled instruments and non-tangible energy credits that arise from complying with state and federal regulations and laws. The demand for production and consumption of cleaner energy from market participants determines the value of these credits.
 
These marketable products originated from governmental efforts to reduce and eliminate greenhouse gas (GHG) emissions and to promote clean energy.


Types of Environment Commodities

Environmental commodities are designed to benefit companies that save energy -- regardless of size -- and penalize companies that aren’t frugal with energy. There are four types of environmental commodities:
 
  • Renewable Energy Certificates (RECs)are renewable energy credits, green tags, and trade-renewable certificates.
  • Carbon Offsetsare projects that generate carbon credits for businesses. They happen outside of the mandated caps by governments. It is a way to reward the production of clean energy.
  • Solar Renewable Energy Certificates (SRECs)are solar energy credits.
  • Energy Efficiency Credits, also known as white certificates, are tradeable and offer gain awards in energy efficiency.

How Can Environmental Commodities Help Your Community?

RECs can help your local community. Solar energy is an example of a REC that small business owners can access and reduce their upfront costs for participation. Solar energy is an easy way to improve your community economically by creating new jobs and lowering electricity bills overall.
 
REC and carbon offset commodities help to reduce GHG emissions in the atmosphere in your community. Both types of these commodities help to lower emissions of greenhouse gas. Offsets represent a metric ton of reduced and avoided emissions and a REC represents one MWh of generated renewable electrical power.
 
Another way small businesses can help their communities via environmental commodities is to reap the rewards of positive change. For example, your business could start a tree-planting program or sponsor a petition to convert city hall to solar electricity.

How Can Environmental Commodities Help Your Small Business?

In various US states, energy efficiency programs offer rebates to businesses for installing new lighting and control systems as well as financial assistance. You can look for energy efficiency programs implemented by your municipality, county, or state as well as some non-profit organizations.
 
Programs for disadvantaged, minority, and veteran business owners provide financial assistance. They can increase the efficiency of dwellings, save money, and reduce environmental pollutants. Such programs place your small business in the same position as large corporations in reducing electricity costs and saving energy.


Small Businesses Drive Environmental Improvement

A 2020 research study recommended that the climate plan presented by President Biden during his campaign should include small businesses as partners.
 
Although large corporations directly produce less pollution, their impact on smaller businesses is the reason behind many pollutants. That’s in large part due to the fact that many small businesses work for large corporations as supply chains.
 
While large companies pursue go-green initiatives to improve shareholders’ profits, small businesses can engage the same initiatives differently. Small business owners pursue environmental initiatives to help build their reputation in local communities as well as saving money or even making a profit off of energy swaps.


Reward Programs for Clean Energy

The US federal government offers reward programs for the production of clean energy. Here’s how they work:
 
  • The government places a cap on GHGs and splits allowances into smaller cap credits.
  • Cap and trade help the markets determine the price of credits.
  • Companies can purchase or sell their credits to emit greenhouse gases.
The incentives are designed to push businesses of all sizes to reduce emissions.

Summary

Small business owners can leverage environmental commodities by applying to participate in environmental commodity swaps in their communities. Thus, they can turn their energy savings into profits by selling credits to companies that emit more GHGs.


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