What are carbon credits

Carbon credits can be seen as tradable certificates or permits representing the right to emit one ton of carbon dioxide or an equivalent amount of a different greenhouse gas. These credits are part of international efforts to mitigate climate change by providing economic incentives for reducing carbon emissions.

One way in which a entity, such as a organization or a country, could produce carbon credits is through lowering its own emissions. Once the entity proves and documents that it has successfully reduced their emission to a certain point they could receive a certain amount of carbon credits equal to the amount of emission that they have decreased. These credits can then be sold to other parties so that they could use them to decrease their emission.

If you would like to learn more about carbon credits and how they function please visit the carbon credits website or have a look at this investopedia page.