A carbon credit is a market-based tool to generate revenue for climate solutions. When you buy a carbon credit, you are paying a project developer to avoid or remove one metric tonne of CO2e (“e” for “equivalent” greenhouse gases of other kinds) from the atmosphere. This gives carbon credit suppliers the ability to monetize climate solutions. Carbon credits support many different types of carbon credits, from those that plant trees, or avoid deforestation, to those that capture gas from landfills or industrial processes. There are projects that sink seaweed deep into the ocean, and projects that capture CO2 direct from the air. Some project types are possible because of t

echnology, where other project types are optimizing natural ecosystems and processes.

The climate crisis requires urgent action to reduce greenhouse gas (GHG) emissions, which, by 2030, need to fall by about half from 2010 levels. Corporates will need to take several actions to help achieve this:

Measure: Organizations must accurately measure their emissions, including Scope 1, 2 and 3 emissions. This exercise in carbon accounting often requires data from across an organization. The more specific you can be (i.e. using data on specific materials used vs. receipts that capture the monetary value of products) the more accurate your footprint and understanding of your organization’s impact will be.

Reduction: Any credible reduction strategy includes decarbonization. Organizations must take efforts to reduce their emissions footprint, for example by using renewable energy, improving energy efficiency in operations, reducing corporate travel and more. We encourage all organizations to develop a science-aligned target, in line with reducing emissions 50% by 2030, and achieving net zero by 2050.

Credit contributions: Decarbonization work takes time. The best way to have an immediate impact on global emissions is to invest in carbon markets, thereby supporting projects that are already avoiding or removing emissions, WHILE working on longer-term decarbonization strategies. Even net zero aligned reduction plans recognize that after a company has reduced as much as possible, they will be left with some unavoidable emissions that can be removed with high-integrity carbon removals credits. We recommend buyers start investing in carbon markets today to account for what your company has already emitted, and continue to support avoidance and removal projects while reducing your company’s footprint.

Compliance markets are markets regulated by governmental bodies designed to incentivize emissions reductions and penalize companies out of compliance. A very common type of compliance market is a cap and trade market, within which an overall cap on carbon emissions is set (cap), and each of the participants in the market is given a certain number of allowances based on this cap. Participants who generate emissions under their allotment can sell their allowances to participants who generate emissions above their allotment (trade). Over time, regulating bodies decrease the cap, and this is the main driver of emissions reductions. Examples of compliance markets are the California cap-and-trade program, EU Emissions Trading System.

The voluntary carbon market encompasses all transactions of voluntary carbon credits.

Participants in the voluntary carbon market include:

Carbon credit standards help assure the credibility and quality of carbon credits and aid in clarifying how projects are structured to measure and monitor impact.

There are voluntary carbon market standards in place for traditional projects and methodologies (e.g. Verra, Gold Standard), standards for cutting- edge project types (e.g. Puro.Earth), standards for specific project types (e.g. European Biochar Certificate), standards for standards (e.g. ICROA), standards for how corporations deploy carbon credits towards meeting long-term climate goals (e.g. Voluntary Carbon Markets Integrity Initiative (VCMI), Science Based Targets Initiative (SBTi)), and standards for the types of credits that corporations can use to meet those climate goals (e.g. Climate Neutral).

Because these standards have different areas of focus, they cover different criteria, from project design and carbon measurement to co-benefits, governance, and even a project’s capacity to scale. While each of these standards plays a role in our market landscape, it can be confusing as a buyer to understand what to follow.

Taken as a whole, this standards ecosystem represents the best available science on credit integrity, project efficacy, and how organizations should engage with the voluntary carbon market. Each one improves our baseline and understanding of project risk. Each adds value to the market.

Each standard and methodology undergo regular reviews to ensure it’s based on best available science. One is example of this is Verra, who recently updated their REDD+ methodology with a new system for establishing baselines in an effort to reduce some of the uncertainty measurement and error that has caused over crediting in the past.

Methodologies must be third party reviewed in order to get approved. This process helps ensure the methodology is endorsed by peers external to the organization that created the methodology.

ICROA is an organization that has a specific quality standard for carbon crediting programs and standards. The Integrity Council for the Voluntary Carbon Market (ICVCM) is another, more stringent, standard for programs that is in the process of reviewing their first carbon credit programs. The “core carbon principle” stamp of approval will symbolize that projects have met ICVCM’s rigorous standard. This alone shows huge evolution in the market.

Even after this, projects have to be individually third party verified against a methodology, wherein a third party expert must confirm that the project is structured to align with a methodology and ensure it’s following the right rules for measuring and monitoring carbon. Annual issuances of credits must also be third party approved.