What Are Carbon Credits

In 2015, leaders around the world gathered together in Paris to face climate change. As a result of this meeting, the target is to limit the global average temperature increase to 1.5 °C above pre-industrial levels.[1] In order to reach this target, we need to reduce 50% of the greenhouse gases by 2030 and get to net-zero by 2050. But what if some activities cannot reach the carbon-free target? That’s where the carbon credits come into the game.

Carbon credits can be seen as a commodity, where one company that struggles to cut carbon emissions can pay another company to reduce their carbon emissions or capture their carbon. That means, even if the first company cannot reduce their carbon emissions, but the other company can reduce it, the total amount of carbon in the atmosphere is reduced. In this way, businesses can compensate for their carbon emissions or even get a carbon-neutral status.[2]

Article Sources

[1] United Nations, Paris Agreement, 2015

[2] World Economic Forum, What’s a carbon credit?, https://www.weforum.org/agenda/2020/11/what-is-a-carbon-credit-climate-change/

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