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What is Carbon Credit

What is Carbon Credit

Well, for a layman, carbon credit could give some idea from the name itself. It must do something with carbon, which is related to carbon emissions; and credit must do something with finance, trading, or some similar activity. And in fact, carbon credits are just this thing—these are like a key component of national and international carbon emissions trading schemes, which are geared towards providing a way to reduce greenhouse effect. This is like a scheme whereby the businesses and the international authorities are working to cap the carbon emissions around the world and investing in the methods that can reduce the carbon emissions.

This greenhouse effect is reduced on an industrial scale with the help of capping the total annual emissions and letting the market assign a monetary value to any shortfall through trading. These carbon credits can be exchanged, bought or sold by the businesses and anywhere in the international market, and these carbon credits can be used to invest or finance carbon reduction schemes between trading partners and around the world.

Apart from B2B operation of carbon credits, there is also an opportunity for B2C trading, which is offered by many carbon credit trading companies to its customers. The customers, who would like to lower their carbon footprints or want to offset carbon, can buy these carbon credits. However, the quality of these carbon credits is mainly based on the validation process and sophistication of the fund or development company that is acting as the sponsor to the carbon project. You can guess the authenticity and quality of these carbon credits by the price set by the trader: the voluntary units typically have lesser price than the ones that are sold through the Clean Development Mechanism. So, if you are an individual and look to buy carbon credits, you will have to know well before you go out for it.

How buying carbon credits can reduce emissions

It is quite clear that greenhouse effect and carbon emissions can be reduced only when countries and organizations give some monetary help so that alternative methods can be developed. This is where buying the carbon credits help in reducing carbon emissions. These carbon credits help in creating a market that has its sole aim to invest in reducing greenhouse emission and global warming.

Any companies who want to reduce their carbon taxes sell carbon credits. There are many other traders who provide opportunity to offset carbon through carbon credits. Developing countries like India, China, and other Asian countries are trading heavily their carbon credits.

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