The Most Misunderstood Commodity: Carbon Credits

Release date: November 17, 2021
Duration: 58min
Guest(s): Marin Katusa
Marin Katusa
 
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Marin Katusa joins Robert and Kim Kiyosaki to talk about carbon credits. Marin is the author of the book, The Rise of America. Marin shares that he’s rather ‘bullish’ on the rise of America, even in today’s climate. “It’s much worse in China and in Europe right now,” he says. They’re worried about access to gas and heat, food and energy. Itt will be a pinch here in North America and Canada, and our leadership could improve. But there is a reason people try to get into the U.S., he says.

What are Carbon Credits?

Marin explains that one (1) carbon credit is the equivalent of taking one ton of carbon dioxide (equivalent) out of the atmosphere. And, it’s certified, he says. It’s been around for about twenty years, but according to Marin, it ‘was wishy washy’. “Who certified these credits? What type of projects were they?

“It’s all coming to a conclusion after 20 years...something called Article 6, at COP 26 in Glasgow. The Paris Accord, COP 21 in Paris (in 2015), promises that the government’s made now in 2021 in Glasgow...are going to be legislated. Become law.”

Biden will be there in Glasgow to sign the legislation, and while China says they won’t be there, they have already agreed to it. The U.S. had not signed on yet, due to things Trump did during his Presidency, Marin says. China, in fact, has their own carbon credit system that is growing at a faster rate than in North America.

Marin continues with an example; “in China, because access to energy is so important, depending on your standard of how much you have decreased your carbon emissions means, do you get access to power?” If you are not following the government mandate, they just shut off the power on you.

“They won’t do that in North America or Europe, but that is the Chinese way. China, from a government standpoint, are moving towards this because of their ‘air-pocalypse’...how bad their air is.”

The COP will be legislated, Marin says.

What does COP mean?

COP stands for Climate Organization Participation and over 195 countries have signed on to this. It started from COP 21 in 1996 with the Kyoto Protocol in Japan. Every year, it is essentially scientists, greenies and diplomats. It made it to Hollywood, so to speak, in 2015 at COP 21 in Paris because Hollywood stars like Leonardo DiCaprio showed up, along with Bill Gates, CEO’s and billionaires.

“All these people showed up, and then Presidents showed up. Obama did his thing. And the media got behind it.” Moving to today, it’s all been promises, Marin says, but no one has actually met their promise. So because the good intention is there, but as usual, politicians don’t always know how to deliver, the upcoming COP 26 in Glasgow is all about how do we legislate this and make it law?

The UK has already announced that they are going to legislate this, and insurance companies like Lloyd’s of London, will require cooperation on homeowners and insured’s part to be able to be covered.

“You are not going to be able to get your insurance coverage for your properties if you don’t play ball with the new agenda.”--Marin Katusa

If an environmental disaster happens, you might now be covered for it in this instance. Scientists have claimed that a 1 in 50 year climate event has now increased intensity by 38.9 fold.

There are already rumblings in the U.S. Fed, Marin says, about climate change and how they are going to commit to these things.

“Moving forward, if there’s another bailout of the airlines, they are going to have to play ball with the legislation. If you want the money for a bailout, you have to reduce your carbon footprint.”

ESG, or Environmental Social Governance, is the concept of reducing your carbon footprint, but also contributing to the standard of living in some ways.

“Also, is it just a bunch of, like you mentioned, white guys out of Canada, building a gold company, going somewhere in Africa and they make all the money, but then they leave nothing for the locals. They don't educate, they don't improve their lifestyle. Is that happening? Or are they increasing the standard of living and the education across the board? That's the, 'Yes." And then the governance comes in and goes, "Hey, what about the diversity?" Is there equal opportunity? Is there equal gender representation?Are there different factors of all these different... Is it improving or is it just a small group of old white dudes getting rich? Like the old boys club?”

Marin says that it’s important to understand too, that the big Oil companies, like BP for example, will have to take advantage and utilize carbon credits. They’ll have to help fund the sequestering of carbon out of the atmosphere, because ultimately it is cheaper for them to do that, than to shut down oil production. That devalues, decreases their worth, which dominoes into not being able to meet their debt covenants.

Transitioning from a fossil fuel energy world to a green world requires that middle ground, of carbon credits.

How are carbon credits created and who created this?

One of the world’s most famous carbon credit projects was originally slated to be cleared for a palm oil plantation. There was global demand in North America, China for palm oil, but it would and is having a huge effect from a biological standpoint. “From Chimpanzees to monkeys, to the whole biosphere aspect.”

A group became involved and said no, we won’t chop this down for palm oils. They would use this as a project to protect and inhabit the potential to grow trees and maintain trees. “No deforestation to be able to absorb the carbon out of the atmosphere.” You can calculate it, and it’s certified by a company called Verra. They are like the accountants of the carbon credit world.

All of the global companies recognized this as a tier one asset. For example, when you go to book a flight on Delta Airlines, there is a price and you can see your carbon footprint, and it’s calculated. Now the airlines have committed to offsetting their carbon footprint. So that is how you go and create a carbon credit. You have to have a project and you have to have something called ‘additionality factor’. “What are you doing to this project to prevent deforestation?”

Having this carbon credit act certified (that you are adding value to the whole system), and proving there is an additionality factor (was it going to be cleared or cut etc), you create a carbon credit.

You can take those credits and sell them to companies like Shell, BP, Exxon. In perspective, there are about 200 million tons of carbon credits that are going to be certified this year, in 2021. If Shell and Exxon wanted to just offset to meet their new board commitments, as legislated, they have to do this. Just those two companies would purchase over a hundred percent. There’s not enough carbon credits.

“Larry Fink just came out and the last time I was on your show, I said, "The first trillionaire is going to come out of this. The first unicorn trillion company and these uber wealthy individuals are going to be the ones who solve this climate issue. Larry Fink is saying it, BlackRock just announced new funds to get into this. It is new, and so much bigger than Bitcoin. This is so much bigger than gold. So much bigger than the copper market. In fact, this is going to be bigger than the oil market, which makes up about 5% of global GDP.”--Marin Katusa

Marin says that it is not just him saying it; the biggest oil company and oil traders in the world are saying it. And they are all positioning themselves into it.

How are these ‘projects’ that create carbon credits, funded?

Sometimes, the companies that buy the carbon credits are a little ‘late to the game’, he says. If you go to an area that has been deforested, and you want to replant it, it takes up to 20 years to get those trees to grow. So, those credits won’t be certified until 15-20 years out.

But there are many different ways to do this, Marin says. For example, let’s say you are a company that goes and says you want to refurbish all the old lights, incandescent lights, in all the office towers in North America, with LED. A company will fund the LED, and they’ll go to the owners of all of these buildings and say, ‘Hey, we’ll pay for your lights. We’ll pay for the guys to come in and change the lights, but give US the carbon credits that we’re going to be able to certify mathematically. Incandescent versus LED creates a difference in energy use and that is the Additionality Factor that issues you a carbon credit. Then you sell that carbon credit to Shell or Facebook, or Google, etc. Whoever needs it. They need it because they have such a large footprint, that to accommodate the legislation, they’ll have purchased all the existing and available credits.

The Blue, Green and White Carbon Credits

There are three types of carbon credits you really need to focus on, Marin says. There is blue carbon, which is the aquatic or ocean credits, water credits. This particular credit is going to be most valuable, Marin believes and has the largest upside for investors. Like gold versus silver or copper; it’s worth a lot more.

The impact from an environmental standpoint, for example, is one square mile of mangrove forests or ocean credits that absorb 10 times more carbon out of the atmosphere. You get 10 times more there because of its biodiversity effect factor, from algae to coral, turtles, and bird sanctuaries involved.

Chinese shrimp farming companies are farming shrimp in the mangrove forest and it’s being deforested. There’s not enough organic, natural ways to farm the shrimp needed that most of the world uses. This is why Blue carbon credits are going to be worth so much.

Green carbon credits are forest and land. And White carbon credits are air credits; airline credits, energy fuel switching credits. Like a utility that used to produce energy from coal and now they are switching to wind farms, they’ll get a carbon credit for that because they are not emitting pollution.

Swap Line

Essentially 14 nations are lined up with the U.S. Fed. And this is kind of one of the chapters I talked about in my book, you got to follow the money. And there's 14 countries that have been assigned by the U.S. Government as true allies. And what does a true ally mean? I'm willing to lend you money when you really need it. And that's called a swap line. Then everyone else does not have a swap line.

At the end of the day, most of the global debt is done in U.S. Dollars. And these local governments are looking at these gold producers or copper producers or iron ore producers. And the way these things are structured with tax havens, that's why the governments are all trying to create this minimum tax globally because the local governments, whether it's Argentina, where money goes to die, or Peru or Chile changing the tax code on the price of copper, the higher the price goes, the more the government takes in the taxes.

That's a form of nationalization, just recently we saw one of the largest gold producers get their big 20 million ounce gold deposit chopped off at the head. The government's saying, "Nope, you can't do that." After they've spent 30 years exploring, developing, and doing all the work required to put it into production, the government's going to take it. And then they're going to try to do what they want to do with it.

So when you're a negative swap line, look at Turkey for example, why you would want as a U.S. or a foreigner to have assets in Turkey blows my mind because A. They don't have swap lines. B. Everyone is in desperate need of U.S. Dollars. Even if you produce something in Turkey and you sell that gold, you can't take those U.S. Dollars and send them out. You got to exchange them at the government rate. And when's the last time the government rate was the real street rate. You're going to get dinged every step of the way.

Keep it simple. You know, Warren Buffet became one of the greatest investors, probably the greatest investor of all time by sticking to his framework, keep it simple. I've done it. I've put the body armor on. I've hired the French Foreign Legion when we were going through Iraq. And you know, whether it was in Kuwait or in Kosovo, when it just declared independence from Yugoslavia, I'd been there and done that. And it sounds cool to be the Indiana Jones of resources and going on a camel or a donkey through the jungle.

That's good for Hollywood. It's not good for your bank account. Okay? So keep it simple. Go to areas that respect the rule of law, that respect title, expect increasing taxes globally, because that's the one thing that politicians are successful at implementing is more taxes, but keep it simple, look at the infrastructure. So my thesis is very simple. If you're looking for resources, don't go to places where the rule of law doesn't matter.

Marin Katusa is the author of The Rise of America, and you can visit carboncredits.com for more information on today’s subject.

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