Understanding Carbon Credits: A Guide to Greenhouse Gas Trading and Emission Control
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Carbon Credit Explained: Types, Trading, Terminology & Tax Benefits
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Learn everything about carbon credits — what they are, how they work, their types, trading systems, tax impact, and how they help reduce carbon emissions.
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🌍 What is a Carbon Credit?
A carbon credit is a permit that allows a company, country, or organization to emit one metric ton of carbon dioxide (CO₂) or an equivalent greenhouse gas.
This system was developed as part of international efforts to reduce global emissions, especially under agreements like the Kyoto Protocol and Paris Agreement.
🎯 Purpose of Carbon Credits
The main goal is to:
- Control global CO₂ levels
- Encourage industries to adopt greener practices
- Support countries in achieving their climate goals
Carbon credits turn emissions into a marketable asset, encouraging organizations to cut down their emissions to sell unused permits.
🔁 How Carbon Credit Trading Works
Organizations are assigned a carbon emission limit. If they emit less than their limit, they can sell the extra carbon credit to another company that is exceeding its limit.
Example:
- Company A emits under its limit ➝ Sells credits
- Company B exceeds its limit ➝ Buys credits
This creates a carbon market where:
- Buyers = polluters needing more allowance
- Sellers = eco-friendly firms with extra capacity
🏢 Who Is Involved in Carbon Credit Trading?
- Corporates looking to stay within emission limits
- NGOs & DDT (Dedicated Development Teams) who perform tree plantations and clean energy projects to earn credits
- Government bodies and international agencies (like UNFCCC) monitoring, issuing, and verifying credits
🔄 Types of Carbon Credits
1. VER – Voluntary Emission Reductions
- Created voluntarily by companies or communities
- Not mandated by any government
- Earned through activities like solar energy, tree plantation, biogas units
2. CER – Certified Emission Reductions
- Issued by UNFCCC
- Projects must follow strict guidelines
- Verified emission reductions (e.g., renewable energy, reforestation)
🧠 Carbon Credit Terminology
Here are some important terms to understand:
- Nature of Units – 1 carbon credit = 1 ton of CO₂
- Tradable Permit – Can be bought/sold in the open market
- Carbon Allowance – Total emissions allowed under a cap
- History – Introduced under Kyoto Protocol, 1997
- Carbon Offset – A reduction made to compensate for another’s emission
📈 Carbon Credit Price & Market Trends
- Global Price Range:
$3 to $13 per ton of CO₂ (varies by country & policy) - India’s Growing Role:
India ranks among top countries offering green projects for credit earning.
🧾 Tax Benefits and Budget Insights (2018–2019)
- Carbon credits can be claimed as deductible income in Indian tax law.
- Budget 2018–19 (India):
Proposed tax reduction from 30% to 10% on income from carbon credit trading.
This made eco-initiatives more lucrative for Indian companies.
🌐 Importance of Carbon Credit Systems
- Aligns with Paris Agreement goals
- Helps organizations plan sustainable growth
- Encourages eco-projects like solar farms, afforestation, and efficient energy use
- Drives innovation in green technology
📊 Corporate Carbon Credit System
- Credits act as emission currency
- Some companies hold credits (unused or for future sale)
- Others trade them to meet compliance or for profit
🗓 Presentation Topics & Study Formats
- Carbon Credit Roadmap (with timeline)
- PPT in Hindi or English
- Carbon Credit Price Charts
- PDF Summary for Students or Business Leaders
- Importance of Carbon Credits in India’s Net Zero Mission
🏁 Conclusion
Carbon credits are more than a climate policy—they are a financial tool and environmental responsibility mechanism. Whether you’re an organization, policymaker, or student, understanding how carbon credit trading works can open up new possibilities in sustainability and economy.
As carbon markets mature, staying informed about trading rules, taxes, and verified projects will be crucial.
📥 Want the PPT or PDF?
Contact for Presentation | Hindi & English Versions
📞 Call/WhatsApp: 7010932087 / 926
👨💼 Shubham Patil (Bidwan YT)
👨💼 Ajaywani (NJ)
✅ Word Count: ~685
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