What is carbon credit

A Carbon credit is a generic term meaning that a value has been assigned to a reduction or offset of greenhouse gas emissions. Carbon credits and markets are key components of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHGs).

The carbon trade is an idea that came about in response to the Kyoto Protocol. Signed in Kyoto, Japan, by some 180 countries in December 1997, the Kyoto Protocol calls for 38 industrialized countries to reduce their greenhouse gas (GHG) emissions between the years 2008 to 2012 to levels that are 5.2% lower than those of 1990. The idea behind carbon trading is quite similar to the trading of securities or commodities in a marketplace. Carbon would be given an economic value, allowing people, companies, or nations to trade it. If a nation bought carbon, it would be buying the rights to burn it.