Problem

Carbon mitigation and hedging

It is challenging to mitigate the current emissions liabilities. Hedging for future liabilities is more challenging.

• Government mandated credits that are traded on marketplaces are liquid and they can be placed on a balance sheet as an asset. However, these credits have short expiration dates, thereby making them ineffective as long-term hedges.
• Institutional investors mandated credits have long expiration dates, but they are traded over-the-counter. This makes them difficult to classify as assets on a balance sheet.

Companies that want to quantify their environmental liabilities usually navigate an obscure world beyond their competence, and they end up delivering uncertain results. The process of carbon accounting is complex, expensive, and carbon credit markets are also complex and opaque. Even companies with the right intentions are currently encountering challenges to carbon accounting and offsetting, thereby limiting its use in mitigating global emissions.