What is a Carbon Credit

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The term carbon credits have been used throughout the media a ton lately. So what is a carbon credit? A carbon credit is a unit to measure the greenhouse gas emission reduction at an industrial level. Which means large companies can buy carbon credits to offset the carbon footprint of the company’s production of carbon dioxide. The carbon credits are then used to fund carbon footprint reduction processes around the world.

Though the term typically refers to large industries, any person can buy a carbon credit to lower their carbon footprint and lower their environmental impact. The quality and price on each credit is based on the scale and sophistication of the company performing the carbon reducing procedures or called a carbon development company.

The industries associated with burning of fossil fuels are one of the leading contributors to greenhouse gas emissions. Industrial plants for power, cement, steel, fertilizers, and textiles emit large amounts of greenhouse gases in the form of carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons into the air. The greenhouse gases trap infrared energy from escaping which leads to global warming.

The start of trading for carbon credits led to the creation of the Kyoto Protocol. The Kyoto Protocol is an agreement with over 170 different foreign countries to put restrictions on the maximum allowable amount of greenhouse gases that can be emitted in a given year. Businesses in each of these countries are given quotas for their co2 emissions which have to be validated. A business is given a certain amount of credits, with each credit equal to one metric ton of carbon dioxide. Companies that have not used up their allotted number of carbon credits can sell their credits to companies that need more. The flexibility in buying and selling carbon credits allows for companies to find the more effective ways to conserve energy and reduce total greenhouse gas emissions.