The Basics of Carbon Credits


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You may have heard the term “trade carbon credits” before but aren’t quite sure what it means. A carbon credit is a generic term for any tradable certificate or permit that represents the right to emit one tonne of carbon dioxide equivalent (CO2e) into the atmosphere. In other words, it’s a way to put a monetary value on carbon emissions in order to incentivize businesses and individuals to reduce their carbon footprint.

How Do Carbon Credits Work?

Carbon credits can be bought and sold on voluntary or mandatory markets as a way to offset carbon emissions. The most common type of carbon credit is the European Union Emissions Trading Scheme (EU ETS) credit, which is used by countries in the European Union to meet their greenhouse gas emission reduction targets under the Kyoto Protocol.

In order for businesses or industries to emit CO2e into the atmosphere, they must first purchase carbon credits. The money from the sale of these credits is then reinvested into green projects that help offset carbon emissions. For example, a company might use the money from selling carbon credits to build a solar farm, which would help offset their emissions. Alternatively, they could purchase carbon credits that have already been generated by someone else’s green project.

Benefits of Carbon Credits

There are many benefits associated with carbon credits, both for businesses and individuals. Perhaps the most obvious benefit is that it helps reduce greenhouse gas emissions and combat climate change. By putting a monetary value on emissions, businesses and industries are incentivized to find ways to reduce their output of harmful gases.


In addition, carbon credits can create new revenue streams for businesses and generate employment opportunities in the green economy. Moreover, they provide a way for businesses to offset their emissions if they are unable to reduce them outright.

Finally, buying carbon credits is a great way for individuals to offset their own emissions if they want to do their part to fight climate change but don’t know where to start.


Carbon credits are a way to put a price on carbon emissions in order to incentivize companies and individuals to reduce their impact on the environment. There are many different types of carbon credits available on both voluntary and mandatory markets. Carbon credits can create new revenue streams, generate employment opportunities, and help fight climate change. If you’re looking for a way to offset your own emissions, buying carbon credits is a great place to start!