Imagine it takes me a minute to walk to the bathroom, so it’s easier for me to poop on the dining room table because it’s closer. Other people in the house don’t like that, and would like me to stop. But I’m upset because pooping will take me a minute longer if I stop.
So I offer to do some extra chores to get “cleaning credits”. If I amass enough cleaning credits, everyone agrees I can poop on the dining room table and they’ll just deal with it.
Eventually I start doing so many chores, I have more credits than times I need to poop. But other people in the house need to poop too, and they’re jealous I have an extra minute of billable time per poop. So I can offer to sell them some of my “cleaning credits” for money. Now two people can poop on the table, and everyone’s happy.
That’s kind of the idea behind “carbon credits” and “regulatory credits”. Big factories pollute a lot and we don’t like it. We’d like them to invest money in things that pollute less. So we added a lot of pollution taxes to punish people who pollute, then offered to give them credits to avoid the taxes if they pollute less. Some companies who happen to be better at not polluting than others feel like they have “too many” credits, so they make money by selling the credits to companies who don’t want to pollute less. That way everyone’s happy: factories in some places get to pollute more and we can pretend that having a factory somewhere else that pollutes less is better.
Latest Answers