How Carbon Credits Contribute To A Cleaner Environment
Since time immemorial, humans have been using fossil fuels for use in all sorts of endeavours as the main source of energy. However, release of greenhouse gases like methane and carbon dioxide is caused by fossil fuels, which is quite hazardous for the environment. The emissions have resulted in an ever rising accumulation of these hazardous gases in the air, leading to global warming, which can be destructive for earth.
The carbon credit system was a direct outcome of the need to control emissions and protect the environment. Through the well known Kyoto protocol, an agreement reached by more than 170 nations, it was decided to set limits on emissions of greenhouse gases by every participating nation. The country’s administration then utilizes the set limits and prescribes quotas to manufacturing units, identifying the amount of emissions they are allowed to make.
By means of the carbon credits system, the government gives incentives to manufacturing units that create emissions less than the quota, and penalizes those who are not able to do so. One carbon credit is equal to one ton of carbon dioxide released into the environment. Under the scheme, the units which emit above the limit have to purchase an equal amount of carbon credits for such emissions from the global trading market and entities that are below the prescribed emission levels can sell a corresponding amount of carbon credits for the difference between their quota and there emissions.
Such carbon credits transactions motivate lower emissions and thereby help reduce unregulated emissions of greenhouse gases in the air. The trading of carbon credits has made firms pay for their emissions, and it now has a direct effect on the firm’s financial statement. Thus companies are striving to keep their emissions within prescribed limits and adopt eco-friendly industrial alternatives.
Another emission controlling financial strategy is the carbon offset credit, which serves a very similar objective. A carbon offset credit is equal to decrease of one metric ton of CO2 or equivalent greenhouse gas in the atmosphere. Using cleaner and renewable energy sources like wind and tidal energy helps to achieve this important decrease.
Like carbon credits, a carbon offset is purchased to make up for the emissions that are above the allocated limits for a company so that it is able to comply with the emission regulations. Carbon offset is available to governments, companies and even the common man who can balance their carbon footprint through it. Hence, they are able to support and fund the decrease in greenhouse gases and to encourage cleaner forms of energy generation.
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