Since time immemorial, mankind has been making use of fossil fuels for use in all kinds of endeavours as the main means of energy. However, these fossil fuels emit greenhouse gases such as carbon dioxide and methane, which adversely affect the environment. High accumulation of these greenhouse gases in the atmosphere is leading to global warming, with serious damage to the planet.

With an aim of decreasing the emissions and safeguarding the environment, the concept of carbon credits was introduced. The well known Kyoto protocol saw over 170 participants agreeing to fix standard limits on greenhouse gas emissions in their respective countries in a phased manner. The country’s government then makes use of the agreed limits and allocates quotas to different manufacturing entities, fixing the cap for emissions by them so that their business activities do not result in excessive emissions.

By means of the carbon credits concept, the government grants incentives to manufacturing units that create emissions below the quota, and punishes those who are not able to do so. According to its definition, one carbon credit is equivalent to a thousand kilos of carbon dioxide released in the atmosphere. In this innovative system, manufacturing units or firms that emit greenhouse gases below the prescribed quota can sell carbon credits of an amount equivalent to the difference, on the other hand those units that release more will have to buy an equivalent amount of carbon credits from the market.

Global trading of carbon credits focuses on minimization of greenhouse emissions by its ‘benefits and punishment’ mechanism, and leads to a cleaner environment. Companies are made to pay for leaving behind their carbon footprints under the carbon credits policy, and this now has a huge impact on their financial performance. Companies have hence woken up to the necessity of reducing their emissions and find environment friendly business options.

Carbon offset credit is another innovative scheme to control greenhouse gas emission, which works on a similar strategy. One carbon offset stands for the decrease of one metric ton of carbon dioxide or an equivalent in other greenhouse gases. The decrease is mostly achieved by making use of cleaner and more sustainable forms of energy such as solar and wind energy.

A carbon offset is purchased just as carbon credits to offset the excess emissions of that specific organization over and above the allotted caps for compliance to the regulations. Individuals, governments and organizations can all purchase it voluntarily as well to offset their carbon footprint. This helps in promoting and financing decrease in emissions and advancing eco-friendly efforts of production of energy.

Discover more about Carbon Credits and Carbon Offset and get a deeper understanding on how you can help in saving the environment.