Carbon Credits Explained: What They Are, How to Buy Them, and How Businesses Use Them

The global carbon credit market was valued at approximately $114.3 billion in 2025 and is projected to reach $482 billion by 2035, growing at a compound annual growth rate of 15.9%. The voluntary carbon market alone is expected to grow from approximately $2.5 billion in 2025 to $15 billion by 2035. In 2025, 95 million credits were retired in the first half of the year alone. China added cement, steel, and aluminium to its national Emissions Trading System in March 2025, pulling 1,500 firms and roughly 3 billion tonnes of CO2 equivalent under a capped regime. The EU's Carbon Border Adjustment Mechanism (CBAM) became fully operational on January 1, 2026.

Despite this growth, carbon credits remain one of the most misunderstood instruments in corporate sustainability. Many businesses know they should be doing something with carbon credits but are unsure what exactly a carbon credit is, whether they should buy from the compliance or voluntary market, which certification standard to trust, how much to pay, and how to avoid greenwashing accusations. This guide answers all of those questions.

What Is a Carbon Credit?

A carbon credit is a tradeable certificate representing one metric tonne of carbon dioxide equivalent (tCO2e) that has been either prevented from entering the atmosphere (an avoidance credit) or actively removed from it (a removal credit). When a business buys and retires a carbon credit, it offsets one tonne of its own emissions.

The mechanics work like this: a project developer, say a company building a wind farm in India or restoring a mangrove forest in Colombia, demonstrates that their project reduces or removes greenhouse gas emissions compared to a baseline scenario (what would have happened without the project). An independent third-party auditor verifies the claim. A registry like Verra or Gold Standard then issues serialised credits, each with a unique identifier, that can be sold on the open market. When a buyer purchases and retires the credit, it is permanently cancelled in the registry so it cannot be resold. This prevents double counting.

Avoidance vs Removal Credits

This is the most important distinction in the carbon credit market. Avoidance credits represent emissions that would have occurred but were prevented. Examples include protecting a forest from deforestation (REDD+), distributing clean cookstoves to replace wood-burning stoves, or building renewable energy projects that displace fossil fuel generation. Removal credits represent CO2 that has been physically pulled out of the atmosphere. Examples include reforestation and afforestation (trees absorbing CO2 as they grow), direct air capture (machines that extract CO2 from ambient air), biochar (locking carbon into stable charcoal and burying it), and enhanced rock weathering (spreading crushed minerals that absorb CO2 as they dissolve).

The market is shifting toward removals. High-profile investigations into overstated baselines in some avoidance projects (particularly REDD+ forestry) eroded market confidence, with voluntary market values dropping over 70% between 2021 and 2024. The market has since rebounded, but buyers are increasingly demanding removal credits and projects certified under the Integrity Council for the Voluntary Carbon Market's (ICVCM) Core Carbon Principles. In 2026, high-integrity credits command prices 300% higher than low-quality alternatives. 

Compliance vs Voluntary Markets

Carbon credits operate in two distinct markets, and understanding the difference is essential before making any purchase decision.

Most businesses reading this guide will be purchasing credits from the voluntary market. Compliance markets are relevant only if your operations fall under a regulated emissions trading system (e.g., you operate a power plant or steel mill in the EU, or you are a large company subject to California's Cap-and-Trade programme). The voluntary market is where companies proactively buy credits to offset emissions they cannot yet eliminate, to demonstrate climate leadership, or to fulfill net-zero commitments. The SBTi's Corporate Net-Zero Standard requires companies to neutralise residual emissions (less than 10% of their baseline) through high-quality carbon removals. This is where voluntary credits come in.

The Major Certification Standards

Not all carbon credits are created equal. The certification standard behind the credit determines its quality, credibility, and price. Here are the four major standards.

Verra (Verified Carbon Standard / VCS)

Verra is the largest voluntary market registry by volume, accounting for roughly 65 to 70% of all voluntary credits issued globally. Verra has issued over 1 billion Verified Carbon Units (VCUs) since 2007 across project types including forestry and land use (REDD+, afforestation), renewable energy, waste management (landfill gas capture, methane avoidance), blue carbon (mangroves, seagrasses), and carbon capture and storage. Verra led the market with over 10% share in 2025. In April 2025, Verra registered its first project using a Core Carbon Principles (CCP) approved methodology, establishing precedent for premium pricing of CCP-eligible credits. Verra maintains a public registry where all credits are tracked, and projects can be browsed by type, country, and status.

Gold Standard

Gold Standard, founded by WWF, is known for the most rigorous certification process, particularly around social and environmental co-benefits beyond carbon. Gold Standard credits typically price 10 to 20% higher than equivalent Verra credits because of stricter requirements on stakeholder consultation, Sustainable Development Goal (SDG) alignment, and community impact. All Gold Standard credits from 2026 vintages onwards are aligned with the Paris Agreement. Gold Standard is particularly strong in clean energy access (cookstoves, solar), water purification, and community forestry. It has approximately 2,300 projects across over 98 countries.

American Carbon Registry (ACR)

ACR is the oldest private carbon registry, operating since 1996. It is geographically focused on the Americas. ACR is known for robust verification protocols and is approved for CORSIA (the aviation sector's Carbon Offsetting and Reduction Scheme). ACR is now managed by Winrock International.

Climate Action Reserve (CAR)

Climate Action Reserve is primarily US-focused, having grown out of a database created by the State of California. CAR credits can be transferred to Verra's VCS programme, providing flexibility for buyers operating across registries.

The integrity layer: ICVCM Core Carbon Principles. The Integrity Council for the Voluntary Carbon Market (ICVCM) has introduced Core Carbon Principles (CCPs) as a global benchmark for voluntary credit quality. CCP approval requires additionality (the project would not have happened without carbon finance), permanence (the emission reduction is durable), no leakage (emissions are not simply displaced elsewhere), robust quantification, and independent verification. Verra and Gold Standard have both achieved early CCP approval across multiple methodologies. Credits that meet CCP criteria command premium prices. Buyers should prioritise CCP-approved credits to ensure quality and avoid greenwashing risk.

Carbon Credit Pricing in 2026

Quality now trumps price. The market has bifurcated. Low-quality avoidance credits from legacy projects trade at $5 to $15 per tonne. High-integrity removal credits from CCP-approved projects trade at $100 to $500+. Buyers willing to pay for quality get credits with genuine climate impact, regulatory compliance, and reputational protection. Buyers chasing the cheapest option risk greenwashing accusations and credits that fail scrutiny. 

How to Buy Carbon Credits: A Step-by-Step Guide

Measure your emissions first

Before buying credits, you must know what you are offsetting. Complete a GHG inventory covering Scope 1 (direct emissions), Scope 2 (purchased electricity), and ideally Scope 3 (value chain). Use the GHG Protocol methodology. Carbon credits should offset residual emissions that you cannot eliminate through reduction measures. Never use credits as a substitute for actual emission reductions.

Define your credit strategy

Decide the role credits play in your climate strategy. Are you offsetting residual emissions as part of a net-zero commitment (SBTi requires high-quality removals for this)? Contributing to Beyond Value Chain Mitigation (BVCM) while you work on reductions? Meeting a specific regulatory requirement? Responding to customer or investor expectations? Your strategy determines which credit types and standards to target.

Set your quality criteria

Define minimum quality standards before shopping. Recommended criteria include: certified by Verra, Gold Standard, ACR, or CAR; CCP-approved methodology preferred; vintage no older than 5 years (the market prefers 3 to 5 year old "Goldilocks" credits, representing 60% of retirements); removal credits prioritised over avoidance; co-benefits aligned with your values (biodiversity, community development, SDGs); and clear, publicly verifiable retirement on the registry.

Choose where to buy

You have several options. Marketplaces and exchanges: Climate Impact X (CIX), AirCarbon Exchange (ACX), Gold Standard Marketplace, Patch, and Cloverly (for API-based integrations). Direct from project developers: South Pole, 3Degrees, Climate Impact Partners, EcoAct. Brokers and consultancies: For larger purchases, carbon brokers provide tailored portfolio construction and due diligence. Registry marketplaces: Both Verra and Gold Standard maintain public registries where you can browse and purchase credits directly.

Conduct due diligence

Before purchasing, review the Project Design Document (PDD), verification reports, and issuance data. Confirm the project is listed on a public registry with credits available for retirement. Check the methodology version (newer is better). Look for independent quality ratings from platforms like Sylvera, Calyx Global, or BeZero Carbon. These agencies rate credits on a quality scale, providing an independent assessment beyond the registry's certification.

Purchase and retire

After purchasing, you must retire the credits on the registry. Retirement permanently cancels the credit serial numbers so they cannot be resold. This is what gives you the right to claim the offset. You receive a retirement certificate with your organisation's name, the project details, the vintage year, the serial numbers, and the volume retired. Keep this certificate for your ESG reporting, CDP disclosure, and any carbon neutrality claims. Most registries provide public retirement records that can be verified by third parties.

Communicate transparently

Be precise and honest about how you use credits. Under CSRD's ESRS E1, companies must report gross emissions without netting out carbon credits. Credits must be disclosed separately. The EU Empowering Consumers Directive bans generic "climate-neutral" product claims based solely on offsetting from 2026. Do not claim "carbon neutral" unless you can fully substantiate it. Instead, say: "We have reduced our emissions by X% since [base year]. We offset our residual [Y] tonnes through [project type] credits certified by [standard]." Transparency builds trust. Vague claims destroy it.

How Businesses Use Carbon Credits in Practice

Net-zero residual neutralisation. The SBTi Corporate Net-Zero Standard requires companies to reduce at least 90% of emissions across Scope 1, 2, and 3, then neutralise the remaining less than 10% through high-quality permanent carbon removals. This is the most credible use of carbon credits: they address the emissions you genuinely cannot eliminate, not the ones you choose not to.

Beyond Value Chain Mitigation (BVCM). The SBTi recommends (but does not require) that companies invest in mitigation actions outside their value chain while they work on internal reductions. BVCM includes purchasing avoidance or removal credits from projects that would not otherwise receive finance. This is distinct from offsetting: it is not a claim of neutrality but a voluntary investment in global climate action.

Supply chain engagement. Companies increasingly ask suppliers to offset or reduce emissions using credits as part of procurement requirements. This is especially relevant for Scope 3 reduction strategies.

Customer-facing programmes. Some businesses offer customers the option to offset the carbon footprint of their purchase at checkout (e.g., flight bookings, e-commerce orders). This uses API-based credit procurement platforms like Patch or Cloverly that integrate directly into checkout flows.

Regulatory compliance. In compliance markets, credits (or allowances) are a legal requirement. Companies subject to the EU ETS, California Cap-and-Trade, or the UK ETS must hold sufficient allowances to cover their verified emissions. CBAM (operational from January 2026) requires importers of certain goods into the EU to purchase certificates reflecting the carbon price embedded in those goods.

Common Mistakes to Avoid

Buying the cheapest credits available. Unusually cheap credits (under $5 per tonne) often signal poor quality, outdated methodologies, or questionable additionality. A $3 renewable energy credit from 2018 will not withstand scrutiny from investors, regulators, or media. Pay for quality.

Failing to retire credits. If you buy credits but do not formally retire them on the registry, you have not offset anything. The credits remain in circulation and could be resold. Always verify retirement on the public registry.

Offsetting without reducing. Credits should complement emission reductions, not replace them. A company that increases its emissions year over year while buying credits will face greenwashing accusations. The SBTi and VCMI both require demonstrated reduction trajectories before credits can be used for claims.

Making vague "carbon neutral" claims. From 2026, the EU Empowering Consumers Directive prohibits generic environmental claims based solely on offsetting. Specify exactly what you are offsetting, with what type of credit, from which standard, and at what volume. Substantiate every claim.

Ignoring vintage. The "vintage" of a credit is the year the emission reduction occurred. The market strongly prefers vintages from the last 3 to 5 years. Credits with older vintages (pre-2020) trade at significant discounts and may not be accepted under some quality frameworks.

Conclusion

Carbon credits are neither a silver bullet nor a scam. They are a legitimate financial instrument that, when used correctly, directs capital toward projects that reduce or remove greenhouse gas emissions from the atmosphere. The key is using them correctly: measure your emissions first, reduce what you can, then offset the residual with high-quality, independently verified, CCP-approved credits from reputable registries. Retire them publicly. Communicate transparently. And never treat credits as an alternative to the hard work of actual decarbonisation.

The market is maturing rapidly. The ICVCM's Core Carbon Principles, the VCMI's Claims Code of Practice, the SBTi's BVCM guidance, and EU regulations like the Empowering Consumers Directive are all raising the bar for how credits are used and communicated. Companies that invest in quality today, building portfolios of CCP-approved removals from Verra, Gold Standard, and emerging registries, will be positioned for a market that rewards integrity and punishes greenwashing.