Fossil fuels have been extensively used as the primary source of energy for several decades now in all types of industries and for personal use. However, emission of greenhouse gases like methane and CO2 is caused by fossil fuels, which is very hazardous for the environment. The emissions have led to an ever increasing accumulation of these hazardous gases in the air, giving rise to global warming, which can be disastrous for our planet.
With the objective of decreasing the emissions and protecting the environment, the concept of carbon credits was brought into existence. More than 170 nations had decided through the Kyoto protocol to fix limits on greenhouse gas emissions across the globe in a pact back in 2005. The set limits are then utilized by the country's government for allotting quotas to various industrial and commercial entities of how much emission they are allowed.
Through the carbon credits concept, the market gives incentives to manufacturing entities that create emissions below the quota, and punishes those who are not able to do so. One thousand kilograms of carbon released in the atmosphere is equivalent to one carbon credit, according to its definition. Under the arrangement, the units which emit more have to buy an equal amount of carbon credits for such emissions from the global trading market and units which are under the prescribed emission levels can sell an equivalent amount of carbon credits for the disparity between their quota and there emissions.
Such global trading of carbon credits is targeted at regulating the overall quantity of emissions of greenhouse gases in the air by incentivizing lesser emissions by industrial units. The trading of carbon credits has made emissions an internal cost of running a company, which is now also included in the financial reports. Thus firms are trying hard to keep their emissions within prescribed limits and go for eco-friendly business options.
Another financial instrument called carbon offset credit has also been designed with almost the same objective in mind. One carbon offset represents the reduction of one metric ton of carbon dioxide or a corresponding quantity in other greenhouse gases. This CO2 decrease is achieved by using renewable and eco-friendly forms of energy like solar and wind energy.
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 conform to the emission regulations. Individuals, governments and organizations can all buy it voluntarily as well to balance their carbon footprint. Their purchase helps in funding the decrease of greenhouse gases and encouraging eco-friendly methods of energy generation.
With the objective of decreasing the emissions and protecting the environment, the concept of carbon credits was brought into existence. More than 170 nations had decided through the Kyoto protocol to fix limits on greenhouse gas emissions across the globe in a pact back in 2005. The set limits are then utilized by the country's government for allotting quotas to various industrial and commercial entities of how much emission they are allowed.
Through the carbon credits concept, the market gives incentives to manufacturing entities that create emissions below the quota, and punishes those who are not able to do so. One thousand kilograms of carbon released in the atmosphere is equivalent to one carbon credit, according to its definition. Under the arrangement, the units which emit more have to buy an equal amount of carbon credits for such emissions from the global trading market and units which are under the prescribed emission levels can sell an equivalent amount of carbon credits for the disparity between their quota and there emissions.
Such global trading of carbon credits is targeted at regulating the overall quantity of emissions of greenhouse gases in the air by incentivizing lesser emissions by industrial units. The trading of carbon credits has made emissions an internal cost of running a company, which is now also included in the financial reports. Thus firms are trying hard to keep their emissions within prescribed limits and go for eco-friendly business options.
Another financial instrument called carbon offset credit has also been designed with almost the same objective in mind. One carbon offset represents the reduction of one metric ton of carbon dioxide or a corresponding quantity in other greenhouse gases. This CO2 decrease is achieved by using renewable and eco-friendly forms of energy like solar and wind energy.
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 conform to the emission regulations. Individuals, governments and organizations can all buy it voluntarily as well to balance their carbon footprint. Their purchase helps in funding the decrease of greenhouse gases and encouraging eco-friendly methods of energy generation.
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