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Everything You Need to Know About Carbon Credits
As the world works toward a more sustainable future, carbon credits have become an important climate solution. They help individuals and businesses take responsibility for their environmental impact—while supporting meaningful climate action.
What Are Carbon Credits?
A carbon credit represents permission to emit one tonne of carbon dioxide (CO₂) or an equivalent greenhouse gas. In simple terms, it’s a way to measure, control, and reduce pollution through a structured system. When an organisation cuts its emissions below allowed levels, it earns carbon credits. These credits can then be sold to others that are still transitioning toward cleaner operations.
Why Do Carbon Credits Matter?
Carbon credits help climate action in three key ways:
They reduce emissions by setting limits on how much pollution is allowed
They reward cleaner choices, encouraging greener technology and practices
How Do Carbon Credits Matter?
Carbon credits operate through a cap-and-trade system:
- A limit (cap) is set on emissions
- Companies that emit less can sell unused credits
- Companies that emit more must buy credits
- This system turns emission reduction into a shared responsibility.
Types of Carbon Credits
Carbon credits are generated from projects that reduce emissions or remove carbon from the atmosphere. Common types include:
- Renewable Energy Credits (RECs) : From clean energy sources such as solar, wind, and hydropower.
- Forestry Credits : From reforestation, afforestation, and responsible forest management.
- Agricultural Credits : From sustainable farming practices that reduce emissions and protect land.
- Industrial Process Credits : From cleaner technologies and energy-efficient industrial operations.
- Carbon Capture & Storage (CCS) Credits : From projects that capture and securely store carbon emissions.
Each credit supports measurable climate action while advancing long-term sustainability goals.