How does this whole process of carbon credit works?

Answer 1

The way carbon credits or carbon offsets work is each credit buys a tree which has a calculated amount of carbon removal over its estimated lifetime. (This is a pollute now, fix it later...maybe philosophy.) So, assuming the tree lives and thrives for its lifetime, and assuming no one cuts it down to harvest it or use the land, and assuming more tropical rain forest doesn't get converted to farming land (which by the way is not very likely), then the tree consumes carbon, until it burns from a forest fire, then it dumps a lot of that carbon back into the atmosphere.

Carbon offsets can also be used toward renewable non-polluting electrical generation, such as wind mill generators. At least that is the tag line. The problem is that a wind driven generator is very expensive to buy install and maintain. A tree isn't.

In my opinion it is a complete farce. It is just a feel-good method for the liberal politicians and rich celebrities that want to justify their indulgences (private jets, air conditioned 30 room mansions, etc.)

Check out the links below.

Answer 2

There is a pretty good explanation at Wikipedia.

Here is an excerpt:

Carbon credits create a market for reducing greenhouse emissions by giving a monetary value to the cost of polluting the air. This means that carbon becomes a cost of business and is seen like other inputs such as raw materials or labor.
By way of example, assume a factory produces 100,000 tonnes of greenhouse emissions in a year. The government then enacts a law that limits the maximum emissions a business can have. So the factory is given a quota of say 80,000 tonnes. The factory either reduces its emissions to 80,000 tonnes or is required to purchase carbon credits to offset the excess.
A business would buy the carbon credits on an open market from organisations that have been approved as being able to sell legitimate carbon credits. One seller might be a company that will plant so many trees for every carbon credit you buy from them. So, for this factory it might pollute a tonne, but is essentially now paying another group to go out and plant trees which will, say, draw a tonne of carbon dioxide from the atmosphere.
As emission levels are predicted to keep rising over time, it is envisioned that the number of companies wanting/needing to buy more credits will increase, which will push the market price up and encourage more groups to undertake environmentally friendly activities that create for them carbon credits to sell. Another model is that companies that use below their quota can sell their excess as 'carbon credits.' The possibilities are endless hence making it an open market.

Answer 3

In theory, when you buy carbon credits, a company uses your money to plant trees in the rainforest, or to clean up pollution somewhere, or to buy more pollution reducing equipment.

According to a recent article in the Financial Times, it doesn’t work. It is a scam. Companies are collecting money to pay for pollution clean-up that they would have had to do anyway (because of existing laws), and the trees never get planted.

Answer 4

it doesn't. It is just a scam from companies playing on the gloabal warming therory. "buying a credit" doesn't remove any carbon from the atmosphere. Anyone who believes it needs to go visit the idiot Mr. Al Gore and kiss his behind.