Carbon credit is a permit that allows the company that holds it to emit a certain amount of carbon dioxide or other greenhouse gases.

1 credit gives a permission of a mass equal to 1 tonne of carbon dioxide.

Companies get set number of credits which decline over time.

Companies are taxed if they produce a higher level of emission than their permits allow. Companies that reduce their emission can sell or trade their unused permits to another company.

To know more about carbon credits watch the accompanying video.