A carbon credit is a tradable permit for emitting one ton of carbon dioxide (CO₂) or equivalent greenhouse gas, used to achieve carbon offsetting by funding emission reduction or removal projects.  Companies purchase these credits, generated by projects like tree planting, to compensate for their unavoidable emissions. In this way, carbon credits function as a market-based mechanism to help entities reach their net-zero emission targets by balancing residual emissions with verified reductions. 

 A carbon credit is a tradable permit for emitting one ton of carbon dioxide (CO₂) or equivalent greenhouse gas, used to achieve carbon offsetting by funding emission reduction or removal projects. 
   Companies purchase these credits, generated by projects like tree planting, to compensate for their unavoidable emissions. In this way, carbon credits function as a market-based mechanism to help entities reach their net-zero emission targets by balancing residual emissions with verified reductions.  
How Carbon Credits Work
Generation:-
 Projects that reduce or remove greenhouse gases from the atmosphere, such as afforestation or renewable energy initiatives, generate carbon credits. 
Verification:-
These projects must be verified to ensure they genuinely reduce or remove emissions, meeting eligibility criteria. 
Trading:-
Verified credits are then sold on markets, either voluntary or regulatory, to entities that need to offset their own emissions. 
Offsetting:-
Buyers use these credits to compensate for their unavoidable emissions, effectively balancing their carbon footprint. 
Net Zero:-
By purchasing credits that represent reductions or removals elsewhere, organizations can claim to have "netted out" their emissions, contributing to overall net-zero goals. 
Key Concepts
Carbon Offsetting:-
The practice of using carbon credits to counteract an entity's own greenhouse gas emissions. 
Compliance Markets:-
In these regulated markets, companies are given an emissions cap. If they exceed it, they can buy credits to meet compliance requirements. 
Voluntary Markets:-
Here, businesses and individuals voluntarily purchase carbon credits to achieve their own environmental goals and demonstrate corporate responsibility. 
By the end of 2024, over 6,200 carbon credit projects worldwide had issued more than 2.1 billion credits since the 2016 Paris Agreement. 

MJF Lion ER YK Sharma 

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