Blue Source is one of the largest carbon emissions reduction companies in North America. And though you've probably never heard of them, they've offset over 340 million tons of greenhouse gases (GHGs) in 45 states.

Although they're privately held, the sheer size and scope of the business and the activities in which they are involved can serve as a model for how to capitalize on the burgeoning carbon market.

Among the sectors for which Blue Source creates and executes carbon reductions schemes are: 

• Carbon Sequestration
• Energy & Power
• Transportation
• Industrial
• Fugitive Capture
• Agricultural
• Inventory Supply Chart
• Verification Reports
• Aggregation
• Transactions

With the carbon business that diverse, there are myriad opportunities for the individual investor to profit. One need not invest directly in generated carbon credits to do so.

As the carbon market matures--and even to some degree now--investors will be able to capitalize by investing in companies that are providing technology for reducing carbon emissions as well as companies that are inherently nonpolluters.

Last week it was announced that Blue Source will be capturing greenhouse gases from a Kansas fertilizer plant. It will then pump the gases to oil fields up to 120 miles away, where they will be used for enhanced oil recovery.

What we're seeing is a commoditization of carbon. Not only is it valuable when sold as Certified Emissions Reductions (CERs), but also, as seen in the prior example, when it is sold as a natural resource commodity.

Plus, in this age of Peak Oil, any product that increases the production of waning oil wells is naturally going to command a premium. Right now, carbon dioxide in West Texas goes for about $17 per ton.

Trading Carbon Credits

The trading of CERs--now the accepted global carbon trading currency--is increasingly becoming big business. I reported last month that, according to a New York Times article, trading carbon "will be the world's biggest commodity market, and it could become the world's biggest market overall."

And we're seeing the carbon market making strides to fulfill that prophecy right now.

Under Kyoto, a provision was established called the Clean Development Mechanism (CDM). It allows rich countries to buy carbon credits by investing in emission-reduction projects in developing nations. This way, it is easier--and less costly--for members of Kyoto to reach their emission reduction targets.

In China, where emission levels are especially bad, it is easy and inexpensive--when being paid for by richer nations at least--for companies to reduce their discharge of GHGs. So, according to a Reuters story from last week, Chinese companies and Western investors who trade carbon credits are reaping windfall profits on a relatively small initial investment--in some cases, earning up to 1,000%.

Is it any wonder these savvy investors are gobbling up all the cut-rate CERs they can, especially when they can sell them at a premium to dirty companies in developed nations?

And now, the Chicago Climate Exchange offers a futures contract that represents clean projects designed to cut GHG emissions. It is the first such contract to be offered in the U.S., and will be traded just like oil or natural gas futures.

Right now the carbon reduction market in the U.S. is completely voluntary--and the prices have remained relatively low. But it's only a matter of time until carbon cuts are mandated by legislation, and that's when the price will start to skyrocket.

The CER contracts will be offered on the Chicago Climate Futures Exchange, and anyone with access to CCFE clearing firms, like Barclays, Goldman Sachs, JP Morgan, or UBS will able to trade them.

For the futures contract, one CER credit is equivalent to a reduction in emissions of one ton of carbon dioxide. The initial price survey for the contract found a December 2008 CER to be valued at $21.85--about the same as the European contract.

Now--and this is the important part--these futures deals can be very lucrative. There are already over 750 carbon reduction projects registered with the United Nations. In one deal, a group of ten investors bought 129 million credits from two projects in China. When sold in the Western market the credits doubled in value and the investors stand to make over $1.35 billion.

Those are the kinds of gains we love to see.

As the carbon market matures, Green Chip will continue to unveil new ways to profit from it. Whether it's futures contracts or clean energy companies that are reducing emissions, there will definitely be some good money to be made.

The Green Chip portfolio is chock full of winner after winner in the renewables sector. To get access to all these great companies, as well as updates and insight on how to profit from this young and growing industry, click here .

Until next time,

Nick