Explanation of Carbon Credit

clipped from www.bnet.com What Is Carbon Credit? by Jessica Stillman Emissions limits and trading rules vary country by country, so each emissions-trading market operates differently. For nations that have signed the Kyoto Protocol, which holds each country to its own C02 limit, greenhouse gas-emissions trading is mandatory. In the United States, which did not sign the environmental agreement, corporate participation is voluntary for emissions schemes such as the Chicago Climate Exchange. Yet a few general principles apply to each type of market. The commitment a company makes to curb its pollutant output is an increasingly public aspect of strategy. Let’s say a company can’t afford to modify its operations to reduce C02. Purchasing carbon credits or offsets buys it time to figure out how to operate within C02 limits. Each credit a company buys on the Chicago Climate Exchange — usually for about $2 — means another company will remove the equivalent of one metric ton of carbon.