Carbon Credit : Carbon credit is a financial instrument that represents a

tonne of CO2 (carbon dioxide) or CO2e (carbon dioxide equivalent gases)

reduced from the atmosphere from an emission reduction project, which is
used, by governments, industry or private individuals to reduce damaging
carbon emissions that are generated. It is also called as Carbon Offset.
Importance: Carbon credits are utilized for removing existing CO 2 or CO2e
emissions from the atmosphere in the case of carbon sequestration from
forests and planting of trees or the reduction of future CO 2 or CO2e emissions
from renewable energy and energy efficiency projects that displace fossil fuel
power generation production or industrial processes.
Source : Carbon credits originate from a range of emission reduction activities
associated with the removal of existing emissions from the atmosphere and
the reduction of future emissions.

Afforestation
and
Reforestation
activities(also
known
as
"methodologies".) are a primary source by which existing emissions can be
removed/reduced from the atmosphere. Because of these "methodologies"
Carbon Credits are created as there may be reductions in future emissions.

Carbon credits originated through these "methodologies" can be created

under different voluntary and compliance market mechanisms and
standards. These instruments have been established so that countries can
comply with their mandatory Kyoto targets and provide a way for voluntary
counterbalancing purposes.

Some of these mechanisms are more beneficial for the environment than
others. Developing parts of the world produce the most carbon credits and
are considered environmental 'hot spots' as they lack the proper laws,
regulations and funding that usually exist in developed regions. Due to these
reasons they have a higher scope for improvement and therefore offer the
most environmental benefits if appropriate improvements are in place.

The goal is to achieve removal/reductions based on the lowest cost and in

line all forms of Climate Change Mitigations. Projects within these schemes
and locations must be accommodative i.e., the people behind a project need
to demonstrate that the emission reductions would not have occurred
without the combined incentives that carbon credits provide. Now the onus is
on the project to show that the carbon emissions are lower because of the
project than without it.