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

Article Written By: Mariel Scott

Since time immemorial, humans have been using fossil fuels for consumption in all kinds of endeavours as the main means of energy. However, these fossil fuels emit greenhouse gases like carbon dioxide and methane, which cause a lot of harm to the environment. Increasing emissions have caused a high level of concentration of these gases in the atmosphere, resulting in global warming, which is endangering life on earth.

The idea of carbon credits was born out of our need to reduce the emissions and save the environment. Through the famous Kyoto protocol, an agreement among over 170 countries, it was decided to put limits on emissions of greenhouse gases by every member country. The nations' government then uses the prescribed limits and allocates quotas to different manufacturing units, fixing the cap for emissions by them so that their business activities do not result in excessive emissions.

By means of the carbon credits concept, the market grants incentives to manufacturing units that create emissions less than the quota, and punishes those who fail to do so. One carbon credit is equivalent to one ton of carbon dioxide emission into the environment. Under this idea, manufacturing firms have to buy an exact amount of carbon credits from the international trading market if their emissions are more than the quota, whereas those companies that are below their emission limit can sell an equivalent amount of carbon credits.

International trading of carbon credits focuses on decreasing greenhouse emissions by its 'reward and penalty' mechanism, and promotes a cleaner environment. The trading of carbon credits has made emissions an intrinsic cost of running a company, which is now reflected in the financial results. Therefore firms are trying hard to maintain their emissions within prescribed limits and adopt eco-friendly business alternatives.

Carbon offset credit is another financial solution to reduce greenhouse gas emission, which follows a similar strategy. One carbon offset represents the reduction of one metric ton of carbon dioxide or a corresponding quantity in other greenhouse gases. Using greener and renewable energy sources like wind and tidal energy helps to attain this crucial reduction.

A carbon offset is purchased just as carbon credits to offset the excess emissions of that specific organization over and above the allotted limits for abiding by the regulations. It is available to governments, organizations and even the common man who can balance their carbon footprint through it. Hence, they are able to support and provide funds for the decrease in greenhouse gases and to encourage sustainable forms of energy generation.

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Learn more about Carbon Credits and Carbon Offset and get a deeper understanding on how you can help in saving the environment.

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