Green/greenearthfocus
As global warming becomes more and more of an increasingly important issue around the world, institutions have responded by allowing for carbon credits designed to encourage companies to reduce their carbon footprint. Just as in tax write offs or business grants, carbon credits work to repay companies for their carbon reduction efforts. These credits are intended to slow down global emissions growth and, presumably, global warming.
Many countries in the world have limits to the amount of carbon they can emit in any given year. Other countries, such as the United States, do not have such limits and defining how much carbon a company can emit is left to organizations such as the Chicago Climate Exchange. If a company does not reach their carbon emission limit, they are left with a credit on these emissions, for example, 15 million metric tons.
On the other hand, if a company exceeds their carbon emission limit, they are left with a negative difference. If the company that exceeded their carbon emission limit purchases the 15 million metric tons from the company that came in under it, they can remain within the guidelines of their governing organization.
In countries that do not cap carbon emissions, it might seem confusing why carbon emission credits are an issue. However, most analysts consider legislature in the United States, for example, to be inevitable. By setting voluntary caps now, companies will be more likely to be prepared to adhere to legal carbon emission caps in the future.
A carbon offset is used as a tool to define a decrease in greenhouse gas emissions. In general, carbon offsets can be measured in metric tons based on the total amount of carbon dioxide (or a similar gas) that is reduced. Most institutions will base a single unit of carbon offset decrease on a decrease in a greenhouse gas equal to a single metric ton. This tool is valuable in setting limits for companies that regularly release greenhouse gases as part of production.
These offsets are normally purchased by such organizations to literally offset the effects of their production with similar prevention and repair methods. For example, in the year 2006, about $5 billion in carbon offsets was purchased by markets to offset a total of 1.6 billion tons of greenhouse gases.










