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They provide a way to reduce greenhouse gas emissions by giving them a monetary value. A credit gives the owner the right to emit one tone of Carbon dioxide. International treaties such as the Kyoto Protocol set Quotas on the amount of greenhouse gases countries can produce. Countries, in turn, set quotas on the emissions of businesses.

The concept of carbon credits came into existence as a result of increasing awareness of the need for pollution control. It was formalized in the Kyoto Protocol an international agreement between 141 countries. Carbon credits are certificates awarded to countries that are successful in reducing the emissions that cause global warming.