A carbon credit is a tradable unit representing a quantified reduction or removal of greenhouse gas emissions. One carbon credit will typically represent one metric tonne of carbon dioxide, or the equivalent amount of another greenhouse gas, measured as CO2e.
Carbon credits can be generated by projects that reduce emissions or remove greenhouse gases from the atmosphere. Depending on the scheme and methodology used, examples can include projects involving renewable energy, forestry, land management or technologies that remove and store carbon.
Once verified and issued, credits can be purchased by organisations and may be retired when used to support an environmental claim. Retiring a credit prevents the same credit from subsequently being used by another buyer.
Carbon credits are often associated with carbon offsetting, but their quality can vary. Businesses should consider how emissions reductions or removals have been calculated, verified and monitored before relying on credits as part of a carbon strategy.
Carbon credits should also be distinguished from emissions allowances used within regulated cap-and-trade schemes, such as the UK Emissions Trading Scheme.
