Credit Systems

Credit Banking and Brokering

The credit transfer system may be entirely unassisted, or it may be brokered. Because in some cases a separation in time exists between when a given credit buyer is looking and when a credit seller is offering, the local government may set up a credit ‘bank’ which purchases credits from sending area landowners and sells them to receiving area landowners. These systems reduce the administrative burden on program participants, and in U.S. programs have also functioned as advocates, information sources, administrators, and fund-solicitors for the program as a whole.

Although TDC programs are all market-based, the degree to which that market is influenced may affect credit prices, and participation. In some U.S. cases, local governments have purchased a large proportion of the credits for a set price. In those cases, other transactions tend to mimic the prices offered by the local government, and the local government has de facto set the market price. This may be seen as desirable or undesirable.

Program designers may also seek to facilitate the emergence of brokers. These third-party, non-government entities can perform some of the same functions in terms of facilitating credit transfers. In these cases, the burden for the local government is greatly decreased, and the process becomes even more market- sensitive as brokers are another layer of private enterprise. However, brokered systems are not able to provide the ancillary support, promotion and programs that TDC banks can, and can be less stable as individual brokers come in and out of the market.