A carbon credit allows the owner, usually a company, to emit a certain amount of carbon dioxide. One certificate stands for one ton of carbon dioxide.
The system is intended to provide an incentive to reduce the emissions of one’s own company. Firstly, an emission cap is set for the company, which is then reduced periodically. If this limit is exceeded, fines are imposed. Secondly, certificates that are not needed can be sold to other companies. The certificates provide a market-oriented mechanism for reducing greenhouse gas emissions. The number of overall available credits is reduced over time in order to reduce global greenhouse gases.