Commercial and individual use of fossil fuels to generate energy has been prevalent for several decades throughout the world. However, fossil fuels give out hazardous greenhouse gases like methane and CO2, which cause a lot of damage to the environment. Increasing emissions have caused a high level of accumulation of these gases in the atmosphere, causing global warming, which is threatening life on earth.
With an aim of reducing the emissions and protecting the planet, the concept of carbon credits was introduced. The famous Kyoto protocol witnessed over 170 national representatives agreeing upon standard caps on greenhouse gas emissions in their respective nations in a phased manner. The fixed limits are then utilized by the nation's government for allocating quotas to various industrial and commercial entities of how much emission they are permitted.
In order to encourage industries and other organizations for releasing lesser than the quota and to penalize those who emit more, the concept of carbon credits was developed. One thousand kilograms of carbon released in the air amounts to one carbon credit, by its definition. In this novel system, manufacturing units or firms that release greenhouse gases below the prescribed quota can sell carbon credits of an amount equivalent to the difference, on the other hand those units that release more will have to purchase a corresponding amount of carbon credits from the market.
Such global trading of carbon credits is aimed at regulating the net quantity of emissions of greenhouse gases in the atmosphere by incentivizing lesser emissions by industrial entities. Companies are required to pay for leaving behind their carbon footprints under the carbon credits policy, and this now has a huge impact on their financial performance. Companies have therefore woken up to the need of reducing their emissions and find environment friendly business options.
Another emission controlling financial scheme is the carbon offset credit, which serves a very similar objective. One carbon offset represents the decrease of one metric ton of CO2 or an equivalent in other greenhouse gases. Using greener and renewable energy sources like wind and tidal energy helps to achieve this crucial decrease.
Like carbon credits, a carbon offset is purchased to make up for the emissions that are beyond the prescribed limits for a firm so that it is able to comply with the emission regulations. Persons, governments and companies can all buy it voluntarily as well to balance their carbon footprint. Their purchase helps in funding the decrease of greenhouse gases and supporting eco-friendly methods of energy generation.
With an aim of reducing the emissions and protecting the planet, the concept of carbon credits was introduced. The famous Kyoto protocol witnessed over 170 national representatives agreeing upon standard caps on greenhouse gas emissions in their respective nations in a phased manner. The fixed limits are then utilized by the nation's government for allocating quotas to various industrial and commercial entities of how much emission they are permitted.
In order to encourage industries and other organizations for releasing lesser than the quota and to penalize those who emit more, the concept of carbon credits was developed. One thousand kilograms of carbon released in the air amounts to one carbon credit, by its definition. In this novel system, manufacturing units or firms that release greenhouse gases below the prescribed quota can sell carbon credits of an amount equivalent to the difference, on the other hand those units that release more will have to purchase a corresponding amount of carbon credits from the market.
Such global trading of carbon credits is aimed at regulating the net quantity of emissions of greenhouse gases in the atmosphere by incentivizing lesser emissions by industrial entities. Companies are required to pay for leaving behind their carbon footprints under the carbon credits policy, and this now has a huge impact on their financial performance. Companies have therefore woken up to the need of reducing their emissions and find environment friendly business options.
Another emission controlling financial scheme is the carbon offset credit, which serves a very similar objective. One carbon offset represents the decrease of one metric ton of CO2 or an equivalent in other greenhouse gases. Using greener and renewable energy sources like wind and tidal energy helps to achieve this crucial decrease.
Like carbon credits, a carbon offset is purchased to make up for the emissions that are beyond the prescribed limits for a firm so that it is able to comply with the emission regulations. Persons, governments and companies can all buy it voluntarily as well to balance their carbon footprint. Their purchase helps in funding the decrease of greenhouse gases and supporting eco-friendly methods of energy generation.
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