A facility or carbon project experiences unit contingency when it possesses surplus environmental credits or allowances beyond compliance or usage requirements. This surplus could occur due to reduced emissions resulting from operational changes, increased efficiency, or the purchase of more credits than necessary for compliance.
Unit contingency comes into play when there is an environmental commodities surplus. This could happen for several reasons:
Risk Management: Entities might keep a surplus of environmental credits as a risk management strategy to ensure they have a cushion in case of unexpected changes in operations or regulatory requirements.
Future Planning: Companies might hold excess environmental commodities for future compliance needs, expansion, or potential changes in regulations that might increase their obligations.
Trading and Selling: Surplus environmental commodities can also be traded or sold in environmental markets. Entities can benefit by selling excess credits to other organizations that might need them to meet their compliance requirements.
Flexibility: It provides flexibility in case of changes in operational activities, expansions, or changes in emissions levels.
Having a unit contingency of environmental commodities provides a safety net and flexibility for companies or entities dealing with these commodities. It ensures preparedness for any unforeseen changes in emission levels, compliance needs, or market demand for these commodities. It can also offer opportunities for additional revenue generation through trading or selling the surplus credits or allowances.