India E-Mobility Show

Carbon Credit Trading Explained


Carbon credits are a form of tradeable certificate that represents the right to emit one tonne of carbon dioxide or an equivalent amount of a greenhouse gas. These credits can be bought and sold between countries and companies in order to help them meet emissions reduction targets set by international agreements such as the Paris Agreement.

The carbon credit market is based on the idea of capping overall emissions and then allowing companies to buy and sell the rights to emit a certain amount of carbon. This creates an economic incentive for companies to reduce their emissions, as they can then sell their unused emissions credits to other companies that are unable to meet their own reduction targets.

Carbon credits are typically counted in terms of tonnes of CO2-equivalent (tCO2e), which is a measure of the total greenhouse gas emissions caused by a particular activity or source. This allows for the easy comparison of emissions from different gases, as all of them can be converted into a common unit of measurement. For example, one tCO2e is equivalent to the emissions from burning around 487 gallons of gasoline.

Carbon credits can be bought and sold on various carbon markets, such as the European Union Emissions Trading System (EU ETS) and the Chicago Climate Exchange (CCX). These markets provide a platform for companies and countries to buy and sell carbon credits and to track their emissions over time.

In summary, carbon credits are a way for companies and countries to offset their emissions by buying and selling the rights to emit a certain amount of carbon. These credits are typically counted in terms of tonnes of CO2-equivalent and can be traded on various carbon markets. The use of carbon credits is meant to create an economic incentive for companies to reduce their emissions in order to meet international emissions reduction targets.