Carbon Credit

AAA

DEFINITION of 'Carbon Credit'

A permit that allows the holder to emit one ton of carbon dioxide. Credits are awarded to countries or groups that have reduced their green house gases below their emission quota. Carbon credits can be traded in the international market at their current market price.

INVESTOPEDIA EXPLAINS 'Carbon Credit'

The carbon credit system was ratified in conjunction with the Kyoto Protocol. Its goal is to stop the increase of carbon dioxide emissions.

For example, if an environmentalist group plants enough trees to reduce emissions by one ton, the group will be awarded a credit. If a steel producer has an emissions quota of 10 tons, but is expecting to produce 11 tons, it could purchase this carbon credit from the environmental group. The carbon credit system looks to reduce emissions by having countries honor their emission quotas and offer incentives for being below them.

RELATED TERMS
  1. Green Levy

    A tax imposed by a government on sources of pollution or carbon ...
  2. Carbon Dioxide Tax

    A tax on businesses and industries that produce carbon dioxide ...
  3. Cap And Trade

    A regulatory system that is meant to reduce certain kinds of ...
  4. Organization for Economic Cooperation ...

    A group of 30 member countries that discuss and develop economic ...
  5. Carbon Trade

    An exchange of credits between nations designed to reduce emissions ...
  6. Green Economics

    A methodology of economics that supports the harmonious interaction ...
Related Articles
  1. Cheap Steps To Reduce Your Carbon Footprint
    Active Trading

    Cheap Steps To Reduce Your Carbon Footprint

  2. Explaining The World Through Macroeconomic ...
    Options & Futures

    Explaining The World Through Macroeconomic ...

  3. Cashing In On Macroeconomic Trends
    Economics

    Cashing In On Macroeconomic Trends

  4. Carbon Trading: Action Or Distraction?
    Economics

    Carbon Trading: Action Or Distraction?

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center