Carbon credits: definition

Carbon credits are essentially permits that allow the holder to emit a certain amount of carbon dioxide or greenhouse gasses, while at the same time supporting activities with an environmental objective. 

Think of carbon credits as someone compensating for their current environmental impacts while also investing in a more sustainable future. For instance, many celebrities opt to purchase carbon credits in order to compensate for their extensive travel and its impact on the planet. While it cannot eradicate the negative impact of these actions, purchasing carbon credits to see new renewable energy or to plant more trees remains as a viable investment in a greener future for all. 

Examples of carbon credits include: 

• Investments on renewable energy projects
• Reforestation projects
• Carbon capture and storage systems

FAQ

What are popular examples of carbon credits?

One of the most popular examples of carbon credits is when people pay more at checkout to purchase carbon credits as an effort to compensate for the environmental impact and carbon dioxide emissions created as a result of their flight. Other well known examples of carbon credits include investments in renewable energy projects such as wind or solar farms, reforestation or afforestation initiatives that absorb CO₂ from the atmosphere, and methane capture projects at landfills or agricultural facilities.

What is the difference between carbon credits and carbon offsetting projects?

The main difference between carbon credits and carbon offsets is that carbon credits are tradable certificates which represent the reduction or removal of one metric ton of carbon dioxide (or its equivalent in other greenhouse gases) from the atmosphere. Carbon offsetting projects, on the other hand, are the actual activities or programs – such as tree planting under reforestation projects or seeking greater development in renewable energy development. 

Overall, offsetting projects produce the credits, while purchasing credits allows individuals or companies to claim those emission reductions toward their own carbon footprint.