What is a Carbon Credit?

A carbon credit is a certificate or permit representing the right to emit one ton of carbon dioxide (CO₂) or the equivalent amount of a different greenhouse gas. Each credit also signifies that one ton of CO₂ has been successfully avoided, reduced, or removed from the atmosphere by a specific project.

Essentially, a carbon credit is a tradable commodity that can be bought and sold on the carbon market. Businesses that generate credits through emission-reduction projects can sell them for additional revenue, while businesses that need to offset their own emissions can purchase them to meet their goals.