What is carbon credit?

As nations have progressed we have been emitting carbon, or gases which result in warming of the globe. Some decades ago a debate started on how to reduce the emission of harmful gases that contributes to the greenhouse effect that causes global warming. So, countries came together and signed an agreement named the Kyoto Protocol.

The Kyoto Protocol has created a mechanism under which countries that have been emitting more carbon and other gases (greenhouse gases include ozone, carbon dioxide, methane, nitrous oxide and even water vapour) have voluntarily decided that they will bring down the level of carbon they are emitting to the levels of early 1990s.

Developed countries, mostly European, had said that they will bring down the level in the period from 2008 to 2012. In 2008, these developed countries have decided on different norms to bring down the level of emission fixed for their companies and factories.

Carbon credits are a tradable permit scheme. They provide a way to reduce greenhouse gas emissions by giving them a monetary value. A credit gives the owner the right to emit one tonne of carbon dioxide.

A company has two ways to reduce emissions. One, it can reduce the GHG (greenhouse gases) by adopting new technology or improving upon the existing technology to attain the new norms for emission of gases. Or it can tie up with developing nations and help them set up new technology that is eco-friendly, thereby helping developing country or its companies ‘earn’ credits.

India, China and some other Asian countries have the advantage because they are developing countries. Any company, factories or farm owner in India can get linked to United Nations Framework Convention on Climate Change and know the ‘standard’ level of carbon emission allowed for its outfit or activity. The extent to which I am emitting less carbon (as per standard fixed by UNFCCC) I get credited in a developing country. This is called carbon credit.

These credits are bought over by the companies of developed countries — mostly Europeans — because the United States has not signed the Kyoto Protocol.

More from Knowledge Base :

How does Carbon Credits it work in real life?
What is Clean Development Mechanism?
Carbon Credits – Flip side
Carbon Credits – In layman’s terms
How buying carbon credits attempts to reduce emissions?
Carbon Credits – Indian Scenario

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