It is too complicated for many of us also und is observed as a kind of an indulgences system. Who had not heard about the time when the Catholic Church with all sorts of things like pictures and relics the sale of indulgences spread so terribly that it finally had to be prohibited. Therefore a significant penetration in the usage of CO₂-Certificates has not happened yet.

Today there are supposedly similar systems in place for the offset of CO₂ emissions. Nevertheless – to fight against global warming successfully, we should avoid the emission of CO₂ increasingly. With the certificate market, the EU is forcing a CO₂ emission reduction to a company. They have to pay the price for each ton CO₂ emitted (some companies pay voluntarily too). With this payment, the EU permits to pollute the environment with one ton of CO₂. In most countries, the money collected from the sales of certificates is bound to further energy efficiency, cleantech innovations, and the expansion of renewables.

There are about 17’000 CO₂-heavy emitters in the EU who are obliged to offset their significant CO₂ emissions by the EUA-Certificate (EUA = European Allowance), traded at the Energy-Exchange in Leipzig (called ETS). The goal is to lower CO₂, where it is mainly caused and in the most efficient way.

CO₂ offset markets

After the signature of the Kyoto protocol in 1997, the ETS got implemented. All the heavy emitters in the EU were put on a list and assigned with a certain amount of CO₂ tons allowed to emit per year. If they emit more, they have to buy additional certificates, and if less, they can sell certificates at the exchange or over the counter.

The total amount of allowed tons is yearly reduced by 1.7% and after 2020, even by 2.2% through the EU (that’s the cap-and-trade mechanism). Emissions trading, the approval for CO₂ emissions, is thus scarce. Now, CO₂ emissions receive a price that is continually rising; the fewer certificates are available for all, the higher the price gets. Such an installed market force stimulates investments in more climate-friendly technologies and innovations for the reduction of CO₂ emissions.

Next to the ETS, which covers the substantial amount of 45% of all CO₂ emissions in the EU, there is a second force implemented as a result of the Kyoto Protocol, which is the Clean Development Mechanism (CDM). Companies on the Allowance-List can, in addition to the EUA-Certificates, take Certified Emission Reductions (CERs) certificates to compensate for their emissions. CERs get created with climate protection projects, mostly in developing countries, that are audited and registered by the UN. Companies are allowed, up to a specific limit, to replace EUAs 1:1 with CERs. Companies that voluntarily offset their CO₂ emission use CERs.

The ETS is saving CO₂ emissions right now!

The decrease of CO₂ emissions through the ETS with EUAs is working. In 2018, there was an increase in coal-based power production in Germany due to the low price of EUAs. As the EU took about 900 billion EUAs out of the market, the cost per certificate increased from around € 7 up to €26 today. Within the first eight months of 2019, a downturn of coal-based power of about 25% was the result! Next to a shift to more gas-based energy, there was an increase of 20% of wind-based power usage. If we assume 1 kg CO₂ for 1 ton of coal and 40 grams for 1 ton of wind-based production, we end up with 55’000’000 tons of CO₂ savings. All of Switzerland emits around this amount of CO₂ per year! ETS with EUAs works!

Why is PEP using EUA certificates mainly?

We are going to be open for different certificates within our CO₂-Offset-App. But we believe very much in Cap-and-Trade systems and support, therefore, EUA-certificates and alike primarily. PEP is going to give CO₂ a steadily higher price because offsetting takes EUAs out of the market. The more PEP- customers are willing to use the PEP-App for offsetting their CO₂ emissions in their daily lives, the higher the price for CO₂ is going to be.

In short, the advantages of EUA-certificates:

• It is a proven system in the EU and continues to lower CO₂ emissions
• We believe in the mechanism of cap-and-trade as being the most effective
• It is by far the most extensive system in place all over the world and covers the whole EU (45% of all CO₂ emission under control)
• It can and will be used to offset everything from our PEP-customers
• PEP with its platform is digitalizing the EUA certificate down to fractions of a ton for micro-offsetting
• It is simpler and therefore communicated more efficiently to our target customers

But PEP is going to do much more than the compensation via a CO₂ certificate.

An EUA certificate is enough to offset your personal pollution for the chosen action, but with PEP you’ll additionally invest with so called impact investments. The investment money will go to the PEP foundation which has one main task: to accelerate the energy transition.With such an investment you directly make an impact and not only be CO₂-neutral but instead negative (meaning you actually take CO₂ out of the atmosphere). The money will be bound for a certain time (presumably around 6 years) and be returned to you afterwards. It will be used to finance profitable renewable energy projects which are as close as possible to where you live.

Today, after having an overview of CO₂ compensation, I’m eagerly waiting for our PEP-solution used to impact invest and offset anytime, anywhere, for anything.

And don’t forget: each impact investment and offset costs less than a tip in a restaurant.

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PEP: People. Energize. Power