11/12/2024
Carbon credits are a way to compensate for greenhouse gas emissions by reducing, avoiding, or removing emissions:
What they are
A carbon credit represents the reduction or removal of one metric ton of carbon dioxide or the equivalent amount of other greenhouse gases.
How they are generated
Carbon credits can be generated by projects that:
Remove carbon from the atmosphere, such as reforestation
Reduce the amount of carbon released into the atmosphere, such as renewable energy projects
Companies can also produce carbon credits by cutting their emissions below a certain threshold
How they are traded
Carbon credits are traded in carbon markets, which are either voluntary or compliance markets:
Voluntary carbon markets: Based on projects that reduce or remove carbon dioxide emissions
Compliance markets: Set up by nations or organizations that limit the amount of emissions companies can emit
How they are used
Businesses and individuals can buy carbon credits to offset their greenhouse gas emissions. Companies that emit more greenhouse gases than permitted can purchase carbon credits to cover the excess.
What they are worth
The value of a carbon credit can depend on several factors, including quality, type, size, and geographical location