Eco-Asset Business Value

Measurable value from managing or investing in ecological assets can be realized in two ways. First, value can be found within cost-cutting opportunities associated with environmental compliance, and second, it can be realized as investment value associated with eco-asset banking.

Earth Assets Group is dedicated to the discovery of ecological asset value on the part of landowners & managers, as well as on the part of commercial & industrial business operations. Whether as a landowner or business manager, eco-assets can contribute measurably to annual earnings and ecosystem health & integrity.

Although landowners and businesses may have discovered parts of the ecological asset mix, it's rare when the range of eco-assets or their interdependent nature is fully understood. Compliance specialists that are focused on air mitigation credits rarely see the connection with watershed or wetland credit value, even though their operations may overlap into these varied environmental media. These overlaps can mean interdependence, a value-based transferability, between eco-assets.

As an example of interpollutant trading, some states allow for interchangeability between air pollutant credits. In California, interchangeable credits can be generated from stationary, mobile, or area sources. They are expected to be used primarily by stationary sources, but in the case of trip reduction requirements for companies trying to manage employee vehicle use (hence reduction in mobile emissions), interchangeability can also apply. Districts may develop interchangeable credit rules for any criteria pollutants for which they have regulatory requirements, including VOCs, NOx, SOx, PM, and CO.

Another example of interpollutant trading comes from Louisiana, where oil and chemical companies are allowed to exchange chemical emissions for reduced VOCs, in this case nitrogen oxides.

As an example of intermedia trading, the Board of Directors for the Central Arizona Water Conservation District allows the use of SO2 credits to reduce water rates paid by subcontract and federal customers. In an initial test of this approach, excess SO2 credits were used by CAP customers to offset a near $2 million liability for water allocations, demonstrating the liquidity these eco-assets have achieved.

Another example of intermedia trading stems from city planners discovering the connections between vehicle emissions and agricultural best management practices. Planners have learned that optimum land use practices on farms or commercial forests can lower concentrations of VOCs important to cities striving to achieve compliance with federal / state air pollution standards. Because attainment of air quality standards is connected with federal highway funding, there is a built-in incentive for cities to reward land managers for their contributions to regional air quality. States such as Arizona, California and Texas now have these programs underway.

Eco-Assets Supporting Compliance

Ecological assets are not meant to be a substitute for environmental compliance strategies, but are instead a complimentary addition.

The value of compliance assets usually comes as an economy-of-scale investment associated with mitigation strategies driven by state or federal environmental regulations. As landowners or businesses develop eco-asset banks - whether for criteria air pollutants, wetlands, waste load allocations or in other media - an incremental investment can lead to a surplus of credits not required for compliance. This surplus can be banked, and the bank can be sold over time, hopefully at a premium, or can be used to offset future regulatory demands at a savings associated with the increasing cost of money.

The value of investment assets comes as a result of asset value discounted over time, or with asset appreciation driven by economic rules of supply-and-demand. The goal of every investor is to 'buy low and sell high,' and in this respect institutional investors seem to have little advantage over independents; both can develop, certify and/or bank credits for about the same unit cost.

To learn more about eco-asset ratings and their criteria, click here.

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