Carbon Credits - What They Are And How They Help In Decreasing Emissions
For ages, humans have been using fossil fuels for consumption in all kinds of endeavours as the main source of energy. However, emission of greenhouse gases like methane and CO2 is caused by fossil fuels, which is very hazardous for the environment. Increasing emissions have led to a high level of accumulation of these gases in the atmosphere, causing global warming, which is endangering life on the planet.
The carbon credit system was a direct result of the need to check emissions and protect the environment. Through the well known Kyoto protocol, an agreement reached by more than 170 nations, it was decided to set limits on emissions of greenhouse gases by every participating nation. The country’s government then makes use of the prescribed limits and allocates quotas to various manufacturing units, fixing the upper limit of emissions by them so that their business activities do not result in excessive emissions.
By means of the carbon credits concept, the government grants incentives to manufacturing entities that create emissions below the quota, and punishes those who fail to do so. One ton of carbon released in the atmosphere amounts to one carbon credit, according to its definition. In this novel system, manufacturing units or firms that emit greenhouse gases less than the prescribed quota can sell carbon credits of an amount corresponding to the difference, whereas those units that emit more will have to buy a corresponding amount of carbon credits from the market.
Such carbon credits transactions encourage lower emissions and thereby decrease uncontrolled emissions of greenhouse gases in the environment. The trading of carbon credits has made emissions an intrinsic cost of running a company, which is now also included in the financial reports. This has led companies to actively seek ways to decrease their emissions and adopt greener methods of doing business.
Another financial instrument called carbon offset credit has also been created with almost the same objective in mind. A carbon offset credit is equal to one metric ton of carbon dioxide or equivalent greenhouse gas reduction in the air. The decrease is usually achieved by using greener and more sustainable forms of energy such as solar and wind energy.
A carbon offset is purchased just as carbon credits to offset the excess emissions of that specific organization over and above the allocated limits for abiding by the 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 supporting eco-friendly methods of energy generation.
Learn more about carbon credits and carbon offset and get a deeper understanding on how you can help in saving the environment. Get a totally unique version of this article from our article submission service