By now, we know that carbon emissions are making the planet warm and that’s not a good thing. As global warming creates a lot of unwanted side effects such as sea level rise, drought, loss of biodiversity and etc. So carbon credits is one of many solutions that we as a society are using to keep our planet cool.
Carbon credits are a form of tradable certificates that is generated through projects that deploy renewable energy (e.g., solar and hydropower) or conserve carbon sinks (e.g., afforestation and reforestation) which can be traded to companies or individuals like you and I, that are unable to offset or reduce their carbon emissions in a cost-effective way. In other words, the exchange of carbon credits enables businesses and people to offset their pollution on the one hand while continuing their activities as usual in the short term. This gives them time to find solutions that help to reduce their carbon footprint in the long term.
There are two types of carbon credits:
(i) permits that are issued part of the so-called cap-and-trade program administered in certain countries, where companies that pollute are awarded credits to continue emitting carbon dioxide as part of their business process to a specific limit, and they may sell the unused credits to other companies that need them;
(ii) certificates issued by an offset producer to companies and individuals seeking to offset a certain amount of carbon dioxide emissions into the atmosphere for various reasons.
These carbon certificates can be traded in the carbon market to companies or individuals that want to offset or reduce their carbon emissions.
All in all, carbon credits are a very useful tool to transition to a carbon neutral society where businesses and individuals emit very little carbon into the atmosphere, which will result in a cooler and safer planet.
