The rising levels of harmful greenhouse gases such as CO2 in the atmosphere has led to global concern over the increasingly destructive effects they have on the environment. Systems such as carbon offset and carbon credits were suggested to improve the situation by providing rewards to companies so that they conduct their business in an ecologically sustainable way.
The carbon credits system is quite recent. One carbon credit allows the emission of one tonne of CO2 or an equivalent amount of some other greenhouse gas into the air. The maximum amount of emissions in the world can be capped through the carbon trading system in which carbon credits can be sold and bought.
Every organization is given a specific number of carbon credits that represent the quantity of CO2 and other greenhouse gases that it can release. Organizations opt for carbon trading if their emissions go beyond their share of carbon credits in order to purchase credits due to a legal obligation. They buy them from companies with lower emissions having spare carbon credits.
Hence, the global carbon emissions remain below the prescribed limits, and organizations are incentivized to adopt more environment friendly manufacturing practices in order to decrease emissions so that they do not have to spend on buying carbon credits. The system also incentivizes green firms and encourages them to adopt eco friendly means so as to enhance their earnings through selling their carbon credits in the market.
Carbon credits can be bought like any other product because they are sold in a free market and there are many agencies that trade in them. You can purchase carbon credits even if you are not a part of any organisation in order to reduce your own carbon footprint. The amount contributed through your investment is channelized for financing ecological projects running in various parts of the globe that contribute towards counterbalancing your emissions.
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