Carbon credits are permits that allow companies or organizations to emit a certain amount of carbon dioxide or other greenhouse gases. One credit typically represents the right to emit one metric ton of carbon dioxide. These credits are part of a market-based approach to reduce overall emissions, encouraging businesses to lower their carbon footprint. When a company reduces its emissions below its allocated limit, it can sell its excess credits to others that need them. This system creates a financial incentive for companies to invest in cleaner technologies and practices, ultimately aiming to combat climate change and promote a healthier environment.