A quantifiable, verifiable, and transferable instrument representing a reduction in greenhouse gas emissions. Each unit typically equates to one metric ton of carbon dioxide equivalent that has been prevented from entering the atmosphere. For example, a project that captures methane from a landfill and uses it to generate electricity could earn these units corresponding to the amount of methane destroyed, which otherwise would have contributed to global warming.
These instruments play a vital role in mitigating climate change by providing economic incentives for entities to reduce their environmental impact. They facilitate investment in emissions-reducing projects and allow companies and governments to meet regulatory requirements or voluntary sustainability goals in a cost-effective manner. Their historical context lies in the Kyoto Protocol, which established mechanisms for international cooperation in reducing greenhouse gas emissions, including the creation of tradable carbon units.
