What are carbon credits and how do they work?

Last Updated : June 01 2017

What are carbon credits and how do they work?

by Chloe Johnson 2017 May 24

What does Carbon Credit mean?

Carbon credits are an element used to aid in regulation of the amount of gases that are being released into the air. This is part of a larger international plan which has been created in an effort to reduce global warming and its effects.

A permit which allows a holder to emit 1 ton of carbon dioxide; Credits are awarded to groups or countries that have reduced their green house gases below their emission quota.

The plan works by capping the amount of total emissions that can be released by one company or business. If there is a shortfall in the amount of gases that are used, there is a monetary value assigned to this shortfall and it may be traded. These credits are often traded between businesses. However, they also are bought and sold in international markets at whatever the determined market value for them is.

How does Carbon Credit work?

The state of current investments available on the traditional market is not very stimulating for those wanting to make a decent return whilst not having to take a massive risk. Now more than ever, with the rising cost of living we need our money working harder. More and more investors are turning to alternative projects to create the returns that the traditional market can simply no longer make. The Carbon Market is the fastest growing market in the world. Set to outperform anything in the traditional investment market, a carbon credit investment is the most lucrative investment available on the retail market.

The introduction of the Carbon Tax on 1st July 2012 has affected far more than the big emitters it is established to tax. Carbon Credits are a tangible asset. There are therefore many profitable, safe and ethical investments to aid people on getting involved in the 'Carbon Rush'.

In descriptive terms; a carbon credit is representative of one metric tonne of greenhouse gas emissions removed from the atmosphere; thus offsetting carbon emissions. Growing trees in the Gippsland area of Victoria, Capital Alternatives and their Project Developers are generating carbon credits from fully accredited bio-diverse woodland. These Carbon Credits are classed as 'personal property' in law meaning their value is protected. Those smart investors who have the foresight to acquire them can sell them on to the big emitters for returns which dwarf more 'traditional investments' in the current financial climate.

Although the Carbon Credit market is global, Australian investors have a unique and rare opportunity which is cause for celebration because there is no escape for big emitters. Qantas has recently announced an increase in prices in an effort to combat the cost in offsetting their emissions. These credits can't be made out of thin air and need to created, and this is where the opportunity lies.

There is no escaping the fact that carbon credits are going to make those in the know very happy and very wealthy, the demand is enormous whilst the supply is limited. Capital Alternatives have rare opportunities for retail investors to become involved in the Australian Carbon Credits market by creating these highly sought-after credits while the price is still fixed at $23 until 1st July 2015 when the price floats.


Carbon credits are presently a key segment of national and international emissions trading schemes. They give an approach to lessen nursery impact emissions on a mechanical scale by topping aggregate yearly emissions and giving the market a chance to appoint a fiscal incentive to any shortage through trading. Credits can be traded between organizations or purchased and sold in international markets at the overarching market cost. Credits can be utilized to fund carbon reduction schemes between trading accomplices and around the globe.



Chloe Johnson
#1 Chloe JohnsonAuthor 18 March, 2014, 12:37 Chloe Johnson is a happily married mother of 2. She loves spending time with her kids and her husband. She loves dogs and enjoys travelling in any places.