Would you bet  your company that the U.S. will enact a cap-and-trade regime based on the Waxman-Markey and Kerry-Boxer bills? Global Climate Strategies has.

The European Emissions Trading Scheme provides a mechanism for companies in the EU to sell surplus emission permits to other companies that would otherwise have to pay more to actually reduce their emissions--a typical "cap-and-trade" system. (See this post for a clear description of why cap-and-trade makes sense.)

The United Nations Framework Convention on Climate Change and its Kyoto Protocol created the "Clean Development Mechanism" for emission-reduction credit creation and trading. The idea was to encourage firms in developed countries ("Annex I countries") to buy credits from other countries when these were cheaper than actually reducing their own emissions. The credits would be generated by projects in the Non-Annex I countries that reduced ongoing or future greenhouse gas emissions, or captured and sequestered CO₂ from the atmosphere. There is a complicated process of validation and certification that must be followed for the credits to be tradable.

U.S. companies are not today required to meet mandated emission caps, so they do not have to buy emission permits to offset any emissions above their limit that they cannot reduce. Nor do they need to buy emission credits to meet such limits. Of course some U.S. companies buy carbon offsets to be able to say they are doing something to reduce the impact of their emissions, but that is entirely voluntary.

Global Climate Strategies has put together a project in Texas that is very similar to many CDM projects in the developing world (press release). The project is "focused on replacing 1,000,000 lights in low income housing; achieved a favorable validation report from the UNFCCC DOE on 24th June 2009 and is currently in full-scale deployment. This project will reduce 29,680 t/CO2e per year and 296,801 t/CO2e over the project’s 10 year life." Since Texas is not in a Non Annex I country the CDM is not available. So GCS has registered the project with the Voluntary Carbon Standard, a program similar to CDM that can register certified projects whever they are.

In essense GCS is betting that some sort of cap-and-trade system will be passed in the U.S. and that companies will want to buy credits like the ones it is creating. They will also want to create their own credits by undertaking internal projects, for instance waste-heat-capture or waste-to-energy, if they can make those projects feasible through the sale of such credits.