Carbon Credits - What Are They And How Are They Used?
Tuesday, November 8, 2011
One carbon credit is equivalent to one metric tonne of carbon dioxide. For every metric tonne of carbon dioxide you save you'll be granted a carbon credit. These are presented as certificates and can be sold off to other companies to help their own profit margin. This incentive for businesses makes them more likely to be motivated to lower emissions and it can help their bottom line.
As an example if you save 1000 tonnes of carbon dioxide by running your company more environmentally friendly you will be granted 1000 carbon credits. The 1000 carbon credits that you have just saved can them be sold off to other companies that have polluted over the limit. This will then help your bottom line and besides that show others that you have an eco friendly business.
There are namely two types of carbon credits that are given out, these are voluntary and mandatory. In the Voluntary offset market business can purchase carbon credits on a voluntary basis to lower their carbon footprint and the amount of carbon emissions that result from their activities. The voluntary market is used to fund environmental projects like planting trees or diverting methane gas from farms into electricity at the power plant.
Under the mandatory market governments and companies are required by law to emit greenhouse gases by purchasing carbon credits. Under this market there is a system called cap and trade which states if you're under polluting within a time frame you get to keep the carbon credits to sell to others. This aids them into choosing less intensive carbon activities and increasing their bottom line by selling off the extra credits they may receive from being environmentally friendly. This means that in the new age companies which produce the least amount of greenhouse gases are going to grow larger and thus help even more!
There is another type of offset and it's called 'Renewable Energy Credits'. Renewable energy credits which are also known as 'RECs' support specific renewable energy such as wind and solar power. The main advantage of RECs is that they supply an amount of renewable energy into the market which can benefit many within the surrounding area.
In the end whether it's the voluntary or mandatory market carbon credits are used to let polluters pay for their activities while rewarding the eco companies. These both encourage the reduction of fossil fuels in the atmosphere and the need to contribute and be rewarded for it at the same time. It's a scheme which has grown pretty rapidly over the past few years and should continue to do so. You can invest by choosing companies like select global which is a leading carbon broker-dealer to help you capitalize on this opportunity.
