Fossil fuels have been extensively used as the main source of energy for several decades now in all types of industries and for personal use. However, fossil fuels give out harmful greenhouse gases like methane and CO2, which result in great harm to the environment. The emissions have led to an ever increasing concentration of these harmful gases in the air, giving rise to global warming, which can be disastrous for our planet.
With an aim of decreasing the emissions and protecting the planet, the idea of carbon credits was introduced. Through the famous Kyoto protocol, an agreement among more than 170 nations, it was decided to put limits on emissions of greenhouse gases by every participating country. The set limits are then used by the nation's government for allotting quotas to various industrial and commercial units of how much emission they are permitted.
In the carbon credits scheme, the manufacturing units that emit pollutants more than the prescribed quota are punished while those producing less are rewarded. One ton of carbon released in the atmosphere amounts to one carbon credit, by its definition. Under the arrangement, the units which emit more have to purchase an equal amount of carbon credits for such emissions from the worldwide trading market and entities which are under the prescribed emission levels can sell an equivalent amount of carbon credits for the difference between their allotments and there emissions.
Such carbon credits trading motivate lesser emissions and thereby help reduce unregulated emissions of greenhouse gases in the environment. Companies are required to pay for leaving behind their carbon footprints under the carbon credits policy, and this now has a significant effect on their financial results. Thus companies are trying hard to maintain their emissions within allowed limits and go for eco-friendly business options.
Another financial instrument called carbon offset credit has also been designed with a similar aim in mind. A carbon offset credit is equivalent to one thousand kilograms of CO2 or equivalent greenhouse gas reduction in the air. Making use of greener and renewable energy sources like wind and tidal energy helps to attain this important reduction.
A carbon offset is bought just as carbon credits to offset the extra emissions of that specific organization over and above the allocated caps for compliance to the regulations. Carbon offset is open for governments, companies and even an individual who can offset their carbon footprint through it. This helps in encouraging and funding decrease in emissions and advancing eco-friendly efforts of generation of energy.
With an aim of decreasing the emissions and protecting the planet, the idea of carbon credits was introduced. Through the famous Kyoto protocol, an agreement among more than 170 nations, it was decided to put limits on emissions of greenhouse gases by every participating country. The set limits are then used by the nation's government for allotting quotas to various industrial and commercial units of how much emission they are permitted.
In the carbon credits scheme, the manufacturing units that emit pollutants more than the prescribed quota are punished while those producing less are rewarded. One ton of carbon released in the atmosphere amounts to one carbon credit, by its definition. Under the arrangement, the units which emit more have to purchase an equal amount of carbon credits for such emissions from the worldwide trading market and entities which are under the prescribed emission levels can sell an equivalent amount of carbon credits for the difference between their allotments and there emissions.
Such carbon credits trading motivate lesser emissions and thereby help reduce unregulated emissions of greenhouse gases in the environment. Companies are required to pay for leaving behind their carbon footprints under the carbon credits policy, and this now has a significant effect on their financial results. Thus companies are trying hard to maintain their emissions within allowed limits and go for eco-friendly business options.
Another financial instrument called carbon offset credit has also been designed with a similar aim in mind. A carbon offset credit is equivalent to one thousand kilograms of CO2 or equivalent greenhouse gas reduction in the air. Making use of greener and renewable energy sources like wind and tidal energy helps to attain this important reduction.
A carbon offset is bought just as carbon credits to offset the extra emissions of that specific organization over and above the allocated caps for compliance to the regulations. Carbon offset is open for governments, companies and even an individual who can offset their carbon footprint through it. This helps in encouraging and funding decrease in emissions and advancing eco-friendly efforts of generation of energy.
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