With the growing problem of environmental degradation and pollutions that leads to serious issue like the global warming. The use of carbon credit is a boon to us to protect our nature and help it recuperate from all the damage.
Carbon credit is the result of a well planned concept which first originated in the year 1997 in Kyoto, Japan. Again this protocol was made official by 2001 when 191 countries shook on the concept and agreed that the plan of carbon neutralization is required to save our environment.
Definition of Carbon credit
A carbon credit is a like a permit that allows companies to release one ton of carbon dioxide gas in a fixed period of time. This way it is easy to keep an eye on the companies to understand whether therecarbon neutral use is restricted enough.
Types of Carbon credit
• Voluntary emission reduction is a type of carbon credit that is basically used in exchange of co2 gas. This kind of exchange basically over the voluntary market for carbon credit. This carbon neutrality of the voluntary emission reduction helps in making 1 tonne of co2 gas. This ways the companies can self compensate for their use of co2 gas.
• Certified emission reduction as the name suggests it is a certified issue introduced by the united nation to stop the use of 1 tonne carbon dioxide gas. This carbon credit is basically issued for the projects on the greenhouse effects for reducing the use of this gas by using clean development mechanism.
Goal of carbon credits
The prime goal of the carbon credits is help industries and give them direction for the practise of low carbon dioxide emission. By using carbon credit a bar is setup on how much carbon or other green house gas would be used and how to regulate the emission of co2 gas into a restricted amount.
Also different projects of the emission of green house gas all around the world raises enough fund to use the credit for financing the carbon neutral effects. This scheme is between the trading partners and the people around the globe.
Trading carbon credit
According to the present rule the trading law allow transferring international credit transfer. Also carbon credit is used to trade on both private and public sectors. Most important part of the trade is the cost of the carbon credit.
It is determined based on the amount of demand and supply in market. Also the demand and supply difference varies greatly around one country to another making the price of the credit vary. There are few famous exchanges like the European Climate Exchange or the European Energy Exchange specialized specifically on the trade of the credit.
As carbon negative credits are proven to be effective it is not always possible for small investors to use this credit as investment. So the best solution is using the certified emission reduction (CERs) which is sold by large finance institution by using their carbon funds. This fund helps small investor to get a scope to take entry in market.
Keywords: carbon neutralization
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