Carbon credit

A carbon credit is a certificate representing one metric ton of carbon dioxide equivalent (CO₂e) that a verified climate project has reduced, avoided, or removed from the atmosphere. Companies and individuals buy carbon credits through carbon compensation on the voluntary carbon market to offset emissions they cannot yet cut directly. Credits complement emission reductions. They do not replace them.

Independent programs issue carbon credits into public registries after verifying a project's climate impact. The main programs are Verra's Verified Carbon Standard (VCS), Gold Standard, the American Carbon Registry (ACR), and the Climate Action Reserve (CAR). Typical project types include reforestation, renewable energy, methane capture, and direct air capture. Once a buyer uses a credit to offset emissions, the registry retires it so it cannot be resold or claimed again.

Credit quality varies because it depends on estimating what would have happened without the project, known as additionality. Buyers should check that credits meet recognized integrity benchmarks, such as the Integrity Council for the Voluntary Carbon Market's (ICVCM) Core Carbon Principles, which assess additionality, permanence, and the risk of double counting. Weak verification has exposed the voluntary market to greenwashing criticism, so third-party quality checks matter before a credit supports any sustainability claim.

Carbon credits are often confused with EU ETS emission allowances, but the two are different instruments. An allowance is a compliance permit that a regulated company must surrender for each ton it emits under emissions trading. A carbon credit is a voluntary unit that certifies a ton reduced or removed elsewhere. Allowances cannot meet voluntary offset goals, and credits cannot be surrendered for EU ETS compliance. Companies typically use carbon credits to cover residual emissions on the way to net zero, after reducing what they can within their own corporate carbon footprint.