Carbon Credits – What They Mean And How They Help In Decreasing Emissions

Commercial and individual use of fossil fuels to create energy has been prevalent for several decades throughout the world. However, emission of greenhouse gases like methane and CO2 is caused by fossil fuels, which is very harmful for the environment. Increasing accumulation of these greenhouse gases in the atmosphere is causing the phenomenon of global warming, with serious repercussions for the planet.

The carbon credit system was a direct result of the need to check emissions and protect the planet. Through the well known Kyoto protocol, an agreement reached by more than 170 countries, it was decided to set limits on emissions of greenhouse gases by every member nation. The country’s government then uses the prescribed limits and allocates quotas to various manufacturing units, fixing the cap for emissions by them so that they don’t indulge in excessive emissions.

In order to encourage industries and other entities for emitting lesser than the quota and to punish those who emit more, the idea of carbon credits was brought into the picture. One thousand kilograms of carbon released in the atmosphere is equivalent to one carbon credit, by its definition. In this novel system, manufacturing units or firms that release greenhouse gases below the allocated quota can sell carbon credits of an amount equivalent to the difference, while those units that emit more will have to buy a corresponding amount of carbon credits from the market.

Global trading of carbon credits focuses on minimization of greenhouse emissions by its ‘reward and penalty’ strategy, and leads to a cleaner environment. The market of carbon credits has made firms make good their emissions, and it now has a direct effect on the firm’s financial statement. This has led firms to actively look for means to reduce their emissions and adopt greener ways of doing business.

Carbon offset credit is another innovative solution to reduce greenhouse gas emission, which works on a similar strategy. A carbon offset credit is equal to reduction of one metric ton of CO2 or equivalent greenhouse gas in the atmosphere. This CO2 reduction is obtained by making use of alternative and eco-friendly forms of energy like solar and wind energy.

A carbon offset is purchased by firms or other organizations to offset the emissions that exceed their allocated quotas as per the defined regulations. Industries, governments and even individuals can purchase carbon offset to offset their disproportionate carbon footprint. Their purchase helps in funding the decrease of greenhouse gases and encouraging eco-friendly methods of energy supply.

Learn more about carbon credits and carbon offset and get a deeper understanding on how you can help in saving the environment.