carbon credit

noun

: a tradable credit granted to a country, company, etc., for reducing emissions of carbon dioxide or other greenhouse gases by one metric ton below a specified quota

Once each member's emissions are converted into tradable credits, the exchange works like any financial market. If participants reduce their emissions below their target, they can sell their carbon credits on the exchange for a profit. If they fail to reduce their emissions, they must buy credits from others.

—Al Gore, An Inconvenient Truth, 2006

Under these "cap and trade" arrangements, governments impose limits on the amount of carbon that factories or companies are allowed to emit, and require those who want to exceed the limit to buy "carbon credits."

—Jesse Ellison, Newsweek, 14 July 2008

If a fast-growing country like China accepted an emissions cap and then overshot it, they would have to purchase carbon credits on the international market.

—Ralph Nader and Toby Heaps, Wall Street Journal, 3 Dec. 2008

see also carbon offset

Word History

First Known Use

1990, in the meaning defined above

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