A carbon credit is a financial mechanism used to reduce or offset carbon dioxide and other greenhouse gas emissions in the atmosphere. A carbon credit represents a measurement obtained through specific projects or activities that prevent the release of one ton of carbon dioxide equivalent (CO2e) into the atmosphere or reduce existing emissions.
Carbon credits can be obtained in two main ways:
- Emission Reduction Projects: Reducing carbon emissions through various environmental projects such as forest conservation, renewable energy projects (wind, solar), energy efficiency projects, and waste management projects.
- Carbon Offsetting A company or individual can offset their emissions by investing in emission reduction projects elsewhere when they are unable to reduce their own emissions. This is one way to achieve net-zero emissions.
Carbon credits can be traded in voluntary carbon markets and regulatory carbon markets. Voluntary markets are where companies and individuals purchase carbon credits on their own initiative to offset their carbon footprint. Regulatory markets, on the other hand, are markets where businesses are allowed to buy and sell carbon credits to meet emission reduction targets set by governments.
This mechanism is an important tool for contributing to the fight against climate change and promoting the transition to a sustainable future.
