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Carbon Credits are growing into a trillion-dollar market

Kitco News

(Kitco News) - As part of the global transition to clean energy, most companies around the world will be required to achieve net zero carbon emissions by 2050. This is why the carbon credit market was created, and it has the potential to explode.  "Last year, the total amount of carbon credits that traded was more than $1 billion. In the next 10 to 20 years, we expect carbon credits to be a multi trillion-dollar market," emphasized Brett Heath, Non-Executive Chairman, Carbon Neutral Royalty. "We are going to see this market grow a hundred percent a year potentially for a number of years."

Heath, who is also the CEO of Metalla Royalty & Streaming and Non-Executive Chairman of Nova Royalty, discussed the carbon credit market with Michelle Makori, Lead Anchor and Editor-in-Chief of Kitco News, on the sidelines of the BMO Global Metals & Mining Conference in Hollywood, Florida. Carbon Neutral Royalty, which was just launched, is a carbon credit streaming and royalty company.

Heath explained how carbon credits work-if companies cannot reach net zero carbon emissions they can buy the rights in public markets for those credits. "What we are seeing right now is an asset class that was created by global politicians around the world to fight climate change. They put it in the hands of the private markets, and this was the best thing they could ever do," he said. "The government has been fighting this problem for decades without any real success. They pushed this new asset class by creating the demand for it."

 "Carbon credits allows companies to have a bridge. It allows them to be carbon neutral now, until they can get their businesses truly carbon neutral," Heath pointed out.

 "Carbon credits are not a new asset class. They have been around for about 20 years. But what's new is that this is the first time we have ever seen mass adoption. The government has done this by putting pressure on the largest public and private corporations around the world to adopt and follow these carbon neutral mandates," he continued.

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Heath broke down the carbon credit market by explaining there are many different types of projects like technology, renewable energy and nature-based solutions. "Our company is focused on the nature-based solution segment, and primarily on restoration or reforestation," Heath explained. "We are planting trees. Based on the amount of trees in a certain area that have been previously cut down and based on how much carbon those newly planted trees pull out equals one credit."

In discussing how the carbon credit market is being regulated, Heath disclosed that there are only a few third-party registration groups that do the verification. "It's a very long complicated process which takes about three years to complete," he said. "There isn't an international regulatory authority that oversees it at the moment."

Heath spoke about the huge opportunities in the carbon credit market because everyone has a carbon footprint. "This is a real asset class that is emerging. It's not going away because it applies to everybody. The coke you drink, the clothes you buy, or the nice restaurant that you frequent, eventually those businesses will pass the costs on to you," he stressed. "Right now, it's optional, but eventually the costs will just be passed on to the consumer."

In terms of pricing-one carbon credit which eliminates one ton of carbon dioxide from the environment, Heath revealed that the voluntary prices are in a $11 to $14 range. "The voluntary market has a much broader spread of pricing. We have seen certain types of projects trade $5 to $7 a credit all the way up to the $30 range," he said.

Speaking about Carbon Neutral Royalty, Heath said, "Coming from the background of royalty and the streaming business, we wanted to use that approach again. It is an incredible way to give investors exposure at the asset level, and the leverage of rising prices. But when we looked at the business, we realized we couldn't just approach it as a royalty streaming company," Health added. "We have built a full ecosystem, we are financing the developers, bringing in the distribution groups on the tech side, on the procurement side, and other groups on the implementation side."

Heath is excited about partnering with the blue carbon developer, Worldview International Foundation. Blue carbon is any carbon derived from anything that touches water. "The biggest part of it is mangroves, but there's also sea grass, kelp, wetlands and others. The reason is that blue carbons or mangroves are the largest carbon sinks in the world," he stated. "Mangroves are the gold strikes of the carbon industry."

 "We partnered with Worldview International Foundation, because we wanted to help them fast track their goals. These developers can really make a dramatic impact if they didn't have capital problems," Heath said.

For more on the carbon credit market, please watch the full video above.

Follow Michelle Makori on Twitter: @MichelleMakori

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