What are carbon credits used for?

Carbon credits are mechanisms that allow for the trading of carbon emissions. Essentially, one carbon credit equals one metric ton of carbon dioxide emissions that has been reduced or removed from the atmosphere. The primary purpose of carbon credits is to provide a way to manage and reduce greenhouse gas emissions by creating a financial incentive for companies and organizations to lower their carbon footprint.

In a carbon trading system, entities that exceed their emissions reduction goals can sell their surplus credits to those who are struggling to meet their limits. This market-based approach helps to allocate resources efficiently, as it encourages reductions in emissions where it is most cost-effective to do so. By allowing for this trading, carbon credits facilitate a collective effort to achieve emissions reduction targets in a flexible and economic manner.

In contrast, the other options do not accurately reflect the primary function of carbon credits. Establishing fuel economy standards, for instance, pertains to regulatory frameworks that dictate how efficient vehicles must be, rather than a trading system for emission reductions. Funding environmental research projects is more focused on advancing knowledge and innovation in sustainability, which is unrelated to the direct trading of emissions. Finally, tracking vehicle mileage is a measure of distance traveled, which has no direct correlation with the carbon credit system.