Fossil fuels have been used as the primary source of energy for many decades now in all types of industries as well as for personal use. However, release of greenhouse gases like methane and CO2 is caused by fossil fuels, which is very hazardous for the environment. Increasing emissions have caused a high level of concentration of these gases in the atmosphere, resulting in global warming, which is endangering life on the planet.
With the objective of decreasing the emissions and protecting the planet, the concept of carbon credits was introduced. The famous Kyoto protocol witnessed over 170 participants agreeing upon standard caps on greenhouse gas emissions in their respective nations in a phased manner. The fixed limits are then utilized by the country’s government for allotting quotas to different industrial and commercial units of how much emission they are allowed.
In order to reward industries and other organizations for releasing lesser than the quota and to punish those who emit more, the concept of carbon credits was developed. One carbon credit is equal to one ton of CO2 released into the environment. Under this concept, manufacturing firms have to purchase an exact amount of carbon credits from the international trading market if their emissions are more than the quota, whereas those companies that are below their emission quota can sell an equivalent amount of carbon credits.
Such international trading of carbon credits is targeted at regulating the net amount of emissions of greenhouse gases in the atmosphere by incentivizing lesser emissions by industrial units. The market of carbon credits has made emissions an intrinsic cost of running a company, which is now also included in the financial results. This has led companies to actively look for ways to reduce their emissions and opt for greener ways of doing business.
Another emission limiting financial scheme is the carbon offset credit, which caters to a very similar purpose. A carbon offset credit is equivalent to one thousand kilograms of CO2 or corresponding greenhouse gas reduction in the atmosphere. Using cleaner and renewable energy sources like wind and tidal energy helps to attain this important decrease.
Like carbon credits, a carbon offset is bought to make up for the emissions that go above the prescribed limits for a firm so that it is able to conform to the emission regulations. Persons, governments and organizations can all buy it voluntarily as well to offset their carbon footprint. Thus, they are able to support and fund the decrease in greenhouse gases and to encourage sustainable forms of energy generation.
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Tags: Business, carbon credits, carbon emission, carbon offset, carbon trading, Marketing
