Carbon Credit

Carbon Credit

• Carbon trading is currently the central pillar of the Kyoto Protocol and other international agreements aimed at slowing climate change. Carbon trading is a market-based approach to controlling pollution.

• Carbon trading is a emission trading specifically for carbon dioxide (CO₂) calculated in tonnes of carbon dioxide equivalent or tCO₂^e.

• Carbon trading is about the rights of greenhouse gas emissions. The idea is a response to the Kyoto Protocol. Under Carbon trading, a country having more emissions of carbon is able to purchase the right to emit more and the country having less emission trades the right to emit carbon to other countries.

• Both countries and companies can reduce their emissions below designated levels and sell this amount to a business or country with greenhouse gas emissions that are too high.

• The financial instrument used for this trade is called offset carbon/carbon credit which is equivalent to one metric ton of equivalent CO₂ equivalent.

• Carbon credits are measured in tonnes of carbon dioxide: 1 Credit = 1 Tonne of CO₂

• Difference between carbon footprints and carbon credits is: carbon offsets is total emissions where as carbon credits is total reduction in emission. Carbon credits are bought to compensate carbon footprints.