Carbon credits are permits that represent the right to emit one ton of carbon dioxide or its equivalent in other greenhouse gases. They are part of a market-based approach to reducing overall carbon emissions, aimed at combating climate change. Organizations or governments can buy and sell these credits as a way to encourage reductions in greenhouse gas emissions.
A carbon credit system allows entities that can reduce emissions at a lower cost to sell their excess allowances to those facing higher costs of achieving the same reductions. This trade creates a financial incentive for companies to invest in cleaner technologies and practices. The goal is to create a cap-and-trade system where total emissions are limited and gradually decreased over time, contributing to global efforts to mitigate climate change impact.
Effective accounting and verification mechanisms are essential to ensure that carbon credits represent real and additional emission reductions. Carbon credits can also be generated through renewable energy projects, reforestation, or other sustainable practices that absorb carbon from the atmosphere. Overall, carbon credits play a crucial role in global carbon markets and environmental policy initiatives aimed at reducing greenhouse gas emissions.
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