Carbon credit exchanges allow businesses to purchase credits from projects that reduce emissions. The credits, essentially "permission slips" to emit greenhouse gases, are issued by governments or regulatory bodies as part of a program designed to reduce carbon dioxide pollution. The programs are called cap-and-trade systems and they're used in a number of different ways around the world. These systems typically involve setting a cap on carbon dioxide emissions that declines over time. Businesses can also buy and sell carbon credits from other companies in order to stay below the cap.

As part of this system, many large businesses have pledged to eliminate or at least lessen their greenhouse gas footprints. However, many cannot get rid of all their emissions as quickly as they would like and need to offset the remaining amount by purchasing carbon credits. These purchases are a crucial component of the Paris Climate Agreement's goal to reach net zero emissions worldwide by 2050.

In addition, some businesses want to show their commitment to environmental stewardship by buying carbon credits from sustainable projects. A single carbon credit represents the reduction of a ton of carbon dioxide from the atmosphere, enough to drive your average 22 mpg car more than 1,000 miles.

Many carbon.credit exchange come from projects that facilitate emissions avoidance, often through reforestation and other forest-related initiatives. Others are obtained through carbon capture and storage, such as the removal of carbon dioxide from the air by power plants or from natural sources such as oceans.

To be considered for sale on a carbon credit exchange, these projects must meet a range of requirements that are meant to ensure their integrity and validity. This includes meeting standards related to government approval, methods for measuring emission reductions, and monitoring and reporting. The standards are intended to minimize leakage, which is the shifting of emissions from one source to another. They also ensure that carbon credits are not double counted.

These standards are meant to increase the transparency of carbon markets, making it easier for buyers to find sellers and for sellers to match with interested buyers. The standards also provide a basis for verifying that the carbon credit is genuine and that it represents an actual measurable reduction in global emissions.

Although the market for carbon credits is growing, a number of issues threaten its sustainability and effectiveness. Some of these problems are related to the way in which they are traded and the way the value of a carbon credit is established. Others are the result of the fact that trading carbon is implicitly trading other forms of pollution, including air toxics such as benzene and dioxins.

As demand for carbon credits continues to grow, it is critical to ensure that the rules and regulations governing the marketplace continue to improve. A key to this is ensuring that all participants in the market are held to high standards. This is why the international community took significant steps at the recent Glasgow Climate Change Conference to strengthen the integrity of carbon credits by establishing standards on both procedures and benchmarks for credits.