Carbon credits are a market-based mechanism designed to incentivize and support efforts to reduce greenhouse gas emissions. They offer individuals, businesses, and organizations the opportunity to take part in the fight against climate change by financially supporting projects that reduce or offset carbon dioxide (CO2) and other greenhouse gas emissions.
What are Carbon Credits? Carbon credits represent a specific amount of greenhouse gas emissions that have been avoided, reduced, or removed from the atmosphere. Each credit is equivalent to one metric ton of CO2, and they are typically measured and traded in the form of certificates.
How do Carbon Credits work?
- Emission Reduction: Projects such as renewable energy initiatives, reforestation, energy efficiency improvements, and waste management initiatives work to reduce greenhouse gas emissions.
- Verification: Independent third-party organizations assess and verify the actual emission reductions achieved by these projects.
- Issuance: Once the reductions are verified, carbon credits are issued to the project, representing the amount of emissions avoided or reduced.
- Trading: Carbon credits can be bought and sold on carbon markets, allowing organizations or individuals to purchase these credits to offset their own emissions.
Example: Let’s say there is a company called “SolarTech” that installs solar panels to generate electricity. By harnessing the power of the sun, SolarTech avoids using fossil fuels, which reduces CO2 emissions that would have otherwise been produced. The company’s solar power project is verified, and it is determined that they have reduced emissions by 10,000 metric tons of CO2.
SolarTech can now sell these 10,000 carbon credits on the carbon market. Another company, “ABC Industries,” wants to offset their own emissions and decides to purchase these credits. By buying and retiring these carbon credits, ABC Industries effectively cancels out the 10,000 metric tons of CO2 emissions they produce annually.
Conclusion: Carbon credits provide a practical approach to tackling climate change by allowing emission reduction projects to receive financial support. Through the trading of carbon credits, individuals, businesses, and organizations can contribute to reducing overall greenhouse gas emissions and support sustainable initiatives worldwide. By offsetting their own emissions, companies and individuals can take responsibility for their carbon footprint and contribute to a cleaner and more sustainable future.
By: Nazrul Efendy Bin Noordin