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Fossil fuels have been used as the primary source of energy for several decades now in all kinds of industries as well as for individual use. However, fossil fuels give out hazardous greenhouse gases like methane and CO2, which result in a lot of harm to the environment. Increasing emissions have led to a very high level of concentration of these gases in the atmosphere, resulting in global warming, which is endangering life on the planet.

The idea of carbon credits came into existence out of our need to control the emissions and protect the environment. Through the famous Kyoto protocol, an agreement reached by over 170 nations, it was decided to put limits on emissions of greenhouse gases by every participating country. The country’s government then uses the agreed limits and allocates quotas to different manufacturing units, fixing the upper limit of emissions by them so that they don’t indulge in excessive emissions.

By means of the carbon credits system, the market gives incentives to manufacturing units that keep emissions less than the quota, and punishes those who are not able to do so. One carbon credit is equivalent to one ton of CO2 emission into the environment. In this innovative system, manufacturing units or firms that emit greenhouse gases within the prescribed quota can sell carbon credits of an amount equivalent to the difference, whereas those units that emit more will have to purchase a corresponding amount of carbon credits from the market.

Such carbon credits trading motivate lower emissions and thereby decrease unregulated emissions of greenhouse gases in the air. The trading of carbon credits has made emissions an intrinsic cost of running a company, which is now reflected in the financial results. Therefore companies are trying hard to maintain their emissions within allowed limits and adopt eco-friendly industrial alternatives.

Another financial tool called carbon offset credit has also been designed with a similar objective in mind. One carbon offset stands for the reduction of one metric ton of CO2 or an equivalent in other greenhouse gases. Using cleaner and renewable energy sources like wind and solar energy helps to attain this important reduction.

Like carbon credits, a carbon offset is purchased to offset the emissions that are above the prescribed 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 offset their carbon footprint. Hence, they are able to assist and fund the decrease in greenhouse gases and to encourage cleaner techniques of energy generation.

Learn more about Carbon Credits and Carbon Offset and get a deeper understanding on how you can help in saving the environment. Click here to get your own unique version of this article with free reprint rights.