Glossary

Carbon credit

A tradable certificate representing one tonne of CO2-equivalent avoided, reduced or removed from the atmosphere.

Also called: carbon offset, emissions allowance

A carbon credit is a certificate representing one tonne of CO2-equivalent that has been avoided, reduced or removed from the atmosphere by a specific project, such as reforestation, renewable energy or methane capture. Credits are generated under a registry's methodology, verified by a third party, and can then be bought and retired by an organization to offset its own emissions.

Carbon credits trade in two distinct markets: compliance markets, created by regulation such as the EU Emissions Trading System, where credits function more like legally binding allowances, and voluntary markets, where companies buy credits to support net-zero or ESG reporting claims without a legal mandate. This distinction matters because voluntary-market credit quality varies widely and lacks the enforcement behind a compliance allowance.

Analysts use credits alongside carbon accounting to understand how much of a company's claimed emissions reduction comes from real operational change in its scope 1, 2 and 3 emissions versus purchased offsets. The well-documented pitfalls are additionality (would the reduction have happened anyway), permanence (a forest that later burns releases its stored carbon), and double counting, where the same tonne is claimed by both the buyer and the host country.

Last reviewed September 22, 2026

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Related terms

Carbon accounting Measuring, tracking and reporting an organization's greenhouse gas emissions in standardized units of CO2-equivalent. Scope 1, 2 and 3 emissions The GHG Protocol's three-tier system for classifying a company's direct and indirect greenhouse gas emissions. ESG reporting Disclosing an organization's environmental, social and governance performance to investors, regulators and the public. Emissions factor A standard value converting a unit of activity, such as fuel burned, into the greenhouse gases it produces.

Related tools

Pachama Carbon credit marketplace and monitoring platform using satellite and AI analysis to verify forest carbon projects, not biodiversity directly. Sylvera Independent carbon credit ratings platform using satellite data and machine learning; it rates credit quality, not biodiversity itself.

Related guides

How to choose a biodiversity and land analytics tool Free species and forest databases answer different questions than paid carbon credit rating platforms — know which one you actually need before you start. How to choose a carbon accounting tool Pick a carbon accounting tool by data strategy, Scope 3 depth and which compliance frameworks it maps to, not by the dashboard. How to measure a company's carbon footprint Scopes 1 to 3, where emission factors come from, and the data-collection work that determines whether the number is defensible.