How Carbon Credits Help In Lowering Carbon Emissions
For ages, mankind has been using fossil fuels for consumption in all types of endeavours as the main means of energy. However, these fossil fuels emit greenhouse gases like carbon dioxide and methane, which cause a lot of harm to the environment. The emissions have resulted in an ever increasing concentration of these hazardous gases in the air, giving rise to global warming, which can be destructive for earth.
The carbon credit scheme was a direct outcome of the need to control emissions and safeguard the planet. The famous Kyoto protocol witnessed over 170 participants agreeing to fix standard caps on greenhouse gas emissions in their respective nations in a phased manner. The country’s government then uses the prescribed limits and assigns quotas to various manufacturing units, fixing the upper limit of emissions by them so that their business activities do not result in excessive emissions.
In the carbon credits system, the manufacturing units that emit greenhouse gases above the allocated quota are punished while those producing less are rewarded. One carbon credit is equivalent to one ton of carbon dioxide released into the environment. Under this concept, manufacturing companies have to buy an exact amount of carbon credits from the global trading market if their emissions are higher than the quota, whereas those companies that are under their emission limit can sell an equivalent amount of carbon credits.
International trading of carbon credits stresses on decreasing greenhouse emissions by its ‘benefits and punishment’ strategy, and promotes a cleaner environment. Companies are forced to pay for their adverse impact on the environment under the carbon credits policy, and this now has a significant impact on their financial results. Companies have thus realised the necessity of reducing their emissions and find environment friendly business options.
Another emission controlling financial strategy is the carbon offset credit, which serves a very similar purpose. One carbon offset stands for the decrease of one metric ton of CO2 or an equivalent in other greenhouse gases. Using cleaner 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 excess emissions of that particular organization over and above the allocated caps for compliance to the regulations. Companies, governments and even individuals can purchase carbon offset to counterbalance their excess carbon footprint. This helps in promoting and funding decrease in emissions and advancing eco-friendly efforts of production of energy.
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