Carbon Credits

The concept of Carbon Credit has evolved from the latest human developments to reduce greenhouse gas emissions. Carbon Credit in general term is the value that has been assigned to a reduction in greenhouse gases.  One Carbon Credit is equal to one ton of carbon dioxide, or in some markets, carbon dioxide equivalent gases. Greenhouse emissions are capped and markets are used to allocate the emissions among the group of regulated sources.

Goal:  The goal is to allow market mechanisms to drive industrial and commercial processes in the direction of low emissions or less carbon intensive approaches than those used when there is no cost to emitting carbon dioxide and other GHGs into the atmosphere. Since GHG mitigation projects generate credits, this approach can be used to finance carbon reduction schemes between trading partners around the globe.

There are also many companies that sell carbon credits to commercial and individual customers who are interested in lowering their carbon footprint on a voluntary basis. These carbon offsetters purchase the credits from an investment fund or a carbon development company that has aggregated the credits from individual projects. The quality of the credits is based in part on the validation process and sophistication of the fund or development company that acted as the sponsor to the carbon project

The concept of carbon credits came into existence as a result of increasing awareness of the need for controlling emissions. The IPCC (Intergovernmental Panel on Climate Change) formalized a mechanism for this at the Kyoto Protocol, an international agreement between more than 170 countries, and the market mechanisms were agreed through the subsequent Marrakesh Accords.