

Selling carbon credits refers to the process of purchasing carbon offsets, which are essentially permits to emit a certain amount of greenhouse gases (GHGs), primarily carbon dioxide (CO2), into the atmosphere12. Here's a breakdown of the concept:
What is a carbon credit?
A carbon credit is a tradable permit that allows an entity to emit a certain amount of CO2 or equivalent GHGs without violating regulatory limits12. They are often referred to as carbon allowances or offsets. Each credit represents one ton of CO2 or equivalent GHG emissions.
Why buy carbon credits?
Companies and individuals buy carbon credits to offset their GHG emissions, primarily to:
- Comply with regulations: Governments often mandate that companies reduce their GHG emissions to meet certain standards. Carbon credits help companies meet these requirements without having to reduce their operations significantly.
- Reduce their carbon footprint: By purchasing carbon credits, companies can offset their emissions and present themselves as environmentally friendly, even if they haven't reduced their overall emissions.
- Support renewable energy projects: The revenue generated from selling carbon credits can be used to fund renewable energy projects, promoting a cleaner energy mix and contributing to a more sustainable future3.
How do carbon credits work in practice?
Here's an example to illustrate the process:
- A power plant generates 100 tons of CO2 emissions per year.
- To comply with regulations, the power plant needs to reduce its emissions. However, instead of reducing production, it decides to purchase 100 carbon credits from a company that has reduced its emissions through renewable energy projects.
- The power plant uses these credits to offset its emissions, effectively reducing its overall carbon footprint without sacrificing production capacity.
In summary, selling carbon credits allows companies to emit GHGs while staying within regulatory limits, supporting a cleaner environment, and promoting renewable energy projects.
