Carbon credits are a tradable commodity that represents a reduction of one ton of carbon dioxide (CO2) or equivalent greenhouse gas emissions. Carbon credits are generated by projects or activities that reduce or sequester greenhouse gas emissions, such as renewable energy projects, energy efficiency improvements, or reforestation efforts.
Carbon credits can be bought and sold on carbon markets, which allow companies and governments to offset their own emissions by purchasing credits from projects that reduce emissions elsewhere. Carbon credits are typically priced per ton of CO2 equivalent and the price can vary depending on the market demand, the type of project, and the certification standard.
The purpose of carbon credits is to create a financial incentive for companies and governments to reduce their greenhouse gas emissions. By purchasing carbon credits, organizations can offset their own emissions and support projects that contribute to climate change mitigation. Carbon credits are also used by governments as a policy tool to encourage the transition to a low-carbon economy.
Carbon credits have become increasingly popular in recent years as companies and governments seek to address their environmental impact and meet sustainability targets. However, the effectiveness of carbon credits in reducing greenhouse gas emissions is a topic of debate, and some critics argue that carbon credits can be used as a way to avoid making real emissions reductions or to engage in greenwashing. As such, it is important for carbon credits to be carefully monitored and verified to ensure their environmental integrity.