Dr.

Roli Misra
ASAS, AUM
 What are carbon credits
• Carbon credits also known as carbon offsets, are permits that allow the
owners to emit a certain amount of carbon dioxide or other green house
gasses.
• One credit permits the emission of one tone of carbon dioxide or
equivalent in other greenhouse gasses.
• The carbon credit is half of a so – called cap and trade program. Companies
that pollute are awarded credits that allow them to continue to pollute upto a
certain limit, which is reduced periodically.
• Meanwhile, companies may sell any of the unneeded credits to another
company that need them. Private companies are thus doubly incentivized to
reduce green house emission. Firstly, they must spend money on extra credits
if their emissions exceed the cap, Second, they can make money by reducing
their emission and by selling their excess allowance.
• Proponents of carbon credit system say that it leads to measurable,
verification emission reductions from certified climate action projects, and
that these projects reduce, remove or avoid green house gas (GHG)
emission.
 How do carbon credits works?
• The ultimate goal of carbon credit is to reduce emission of green house
gases into atmosphere.
• Companies or nations are allowed a certain numbers of credits and may
trade them to help balance total worldwide emission.
• The intention is to reduce the number of credits over time, to thus
incentivizing companies to find innovative ways to reduce green house gas
emission.
 Advantages of Carbon Credit
• As previously mentioned, each carbon credit corresponding to one ton of the
carbon that was emitted into the atmosphere. So, just having the credit, is an
advantage.
• The company or country that not see an alternative to reduce its emissions find
advantage in purchase of these credits.
• For some organizations, countries and company, the advantage lies in the sale of
carbon credits, as they are institution that manage to reduce the use of the carbon.
In this way, they boost their economy with the value to invest in the sustainable
activities they are developing.
 Disadvantages of Carbon Credits
• Some institutions and countries can accommodate themselves in this market
to continue emitting their greenhouse gases. They do not invest in actions to
avoid emissions because they are able to buy unlimited credits.
• In this case, the reduction of one ton of carbon, that is one credits, will
never be enough, because, in fact, somebody will use this ton, so there won’t
be any emission reduction, It is a disadvantage that cause much controversy
among environmentalist and world leaders.
• The use of carbon credit also needs to be through of in a sustainable way.
Understand that it is an alternative for emergency needs, not to rest on the
fact that the others has saved.
• Everyone’s focus must be on reducing the greenhouse gas emissions, only in
this way it will be possible to stop the negative impacts caused by global
warming.