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Carbon Credits

Carbon credits are a type of tradable financial instrument that represent the right to emit a certain amount of carbon dioxide or other greenhouse gases. They are typically used as a way to reduce greenhouse gas emissions and mitigate the negative effects of climate change.

Carbon credits can be bought and sold on carbon markets, such as the European Union Emissions Trading System (EU ETS) and the Chicago Climate Exchange (CCX). These markets allow companies and governments to buy and sell carbon credits as a way to meet emissions reduction targets or offset their own emissions.

There are two main types of carbon credits: those that are issued by governments, and those that are generated through voluntary carbon offset projects. Government-issued credits are typically part of a larger regulatory framework, such as a cap-and-trade system, while voluntary carbon offset credits are generated through projects that reduce or remove greenhouse gases from the atmosphere, such as reforestation or clean energy projects.

The use of carbon credits has been controversial, with some critics arguing that they can be used to avoid reducing emissions at their source and may not always result in real and permanent emissions reductions.

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