How Carbon Credit Works?

You may have heard these buzzwords multiple times before or you might have read them for the first time just now. If you are a company that creates products, you might have already encountered carbon credits before. This article will help you not only better understand what a carbon credit is and how it works, but also why is it an essential thing for our environment.

Carbon trading first and foremost is an effective way to tackle global greenhouse gas emissions. Everyone has a carbon footprint associated with the energy they consume that should be reduced. However, there will always be an unavoidable amount of consumption or emissions. This is where the purchase of carbon credits comes into the equation.

What is a Carbon Credit?

Governments create limits on how much pollution companies can create every year by issuing them carbon credits. One carbon credit allows the company to produce 1 ton of pollution per year. Cleaner companies sell the carbon credits they don’t use to companies that pollute too much. If the company doesn’t have enough carbon credits, they pay a big fine to the government. Over time, governments issue fewer carbon credits, making polluting more expensive and rewarding companies that produce less of it or companies that have figured out ways to get rid of it. This system results in less total pollution being generated every year. So far, 184 countries have agreed to decrease their carbon footprint over time.

Currently, the global value of carbon pricing schemes is estimated to be worth $82 billion, according to a new report from the World Bank. The figure for 2017 represents a 56% increase on the $52 billion in the previous year, following the opening of new markets, including China.

Carbon credits can also be generated by non-government and non-profit organizations, who develop and run projects designed to benefit the environment. For example, organization A builds a wind farm. This wind farm now reduces the amount of fossil fuels burned to generate electricity, thus reducing emissions. An independent auditor verifies and issues organization A with X amount of carbon credits to represent this reduced amount of emissions. Organization A is then able to sell the carbon credits on the carbon exchange platform. This is where Windhan comes in. As a company, you can offset unavoidable carbon footprints by purchasing these carbon credits from Organization A, thus contributing to an environmentally safer future. Carbon credits also offer more than just tackling emissions — they can help fund schools, create jobs, fund health care programs and protect biodiversity.

What is in it for you?

By joining the long line of companies that have already been offsetting, not only you will enjoy greater corporate social responsibility, PR and marketing, you will increase your ability to identify and reduce internal efficiencies. Offsetting will also promote you to the top of supplier lists with many large corporations around the world. Environmental credentials nowadays are crucial to winning tenders in an economy that is increasingly concerned about the environment.