Bank of America to Start Issuing Carbon Credits in CA

Willy Staley

By Willy Staley
Posted on Wed Oct 12, 2011, Last Updated on Tue Sep 9, 2014

Willy Staley is a staff writer and columnist for MyBankTracker.com. His columns cover banking, policy, and culture. More Columns »

On Tuesday, Bank of America announced it would start selling carbon offsets, in an agreement with TerraPass, an American company that creates carbon reduction projects, and sells offsets to consumers. With this deal, BofA will ready itself to enter California’s carbon market, where trading is set to start next year.

Bank of America Merrill Lynch’s Global Commodities Group entered into the transaction with TerraPass, which provides BofA (NYSE:BAC) with an option to “purchase and bring to market several million tons” of carbon offsets, through 2020.

The offsets, which TerraPass already sells to climate-conscious consumers, will be sold on California’s carbon market, created by legislation passed in that state in 2006: AB 32, or the California Global Warming Solutions Act.

Bank of America to Start Issuing Carbon Credits in CA

Photograph: nena2112 / PHOTOCASE source

AB 32 established a cap-and-trade system in the state for businesses that emit a significant amount of pollution, in order to bring state emissions levels down to 1990 levels by the year 2020. Businesses that emit more than they are supposed to will have to purchase carbon offsets, and companies that manage to reduce their emissions can sell credits to polluters; politicians, scientists, and concerned citizens hope this will provide a market-based mechanism to encourage companies to lower emissions.

TerraPass manages a portfolio of carbon-reduction projects, and helps bring the offsets created by them to market. Currently, they sell to consumers who want to offset the carbon emissions they incur from a year’s worth of flying, or a year’s worth of driving, or even their wedding. TerraPass currently sells one ton of carbon offsets for $11.90.

Bank of America Merrill Lynch will leverage their market reach and expertise in selling these sort of assets with TerraPass’ already existing stock of carbon-reducing projects, which include wind power, and landfill methane reduction. This particular group of offsets that BofA will help sell will all come from agricultural methane reduction projects.

The offsets can go to market once the ARB, the regulatory body tasked with creating the carbon market, gets out of court; there was a lawsuit filed that suggested the cap-and-trade agreement violated California’s Environmental Quality Act (CEQA), by not examining the efficacy of all available options.

 

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