What is a carbon credit?

A carbon credit represents 1 tonne of CO2e that an organization is permitted to emit. Carbon credits only exist in markets with Cap & Trade regulations. Management teams that emit less than their limit may resell carbon credits on the corresponding carbon market. Carbon credits are NOT the same as carbon offsets.

How much are carbon credits worth?

Carbon credits have different prices, depending on the location and market where they are traded. In 2019, the average price for carbon credits was $4.33 per ton. This figure spiked to as much as $5.60 per ton in 2020 before settling to an average of $4.73 in the first eight months of the following year. 18

What are the benefits of carbon credits?

Carbon credits create a monetary incentive for companies to reduce their carbon emissions. Those that cannot easily reduce emissions can still operate, at a higher financial cost. Carbon credits are based on the cap-and-trade model that was used to reduce sulfur pollution in the 1990s.