The first step to understanding the carbon market is understanding the terminology. This glossary covers the essentials to help you get started.
A carbon project is considered additional when its emissions reductions or removals would not have occurred without the funding from carbon credits. If a carbon credit is not additional, it effectively has no impact and does not bring your company or our planet closer to net zero.
The process of planting trees in areas where there were no forests previously. One of the project activity types that fall under the blanket term ARR (Afforestation, Reforestation and Revegetation).
The practice of preventing CO₂ emissions that would have occurred in the absence of a specific intervention or project, like capturing methane at a landfill.
The act of protecting and preventing land from being deforested. When a project prevents illegal deforestation, such as unpermitted logging in a protected area, it is called Avoided Unplanned Deforestation. When it prevents legal deforestation, such as the permitted clearing of a forest for a cattle ranch, it is called Avoided Planned Deforestation.
The greenhouse gas emissions or removals that would have occurred if a carbon project had not been implemented. A project's climate impact — and therefore the number of credits it is issued — is determined by quantifying the difference between the baseline and actual project performance. A well-constructed baseline is critical to ensure the credibility of a project's climate benefits.
A mechanism through which a company takes action or makes investments outside of its value chain. BVCM can be used to reduce a company's overall climate impact or reach net zero, but it need not be. Purchasing carbon credits is an example of a BVCM action.
Carbon-rich charcoal produced from organic materials through a high-temperature heating process called pyrolysis. When biochar is applied to soil or used in construction materials such as concrete, it locks away carbon that would otherwise have been released into the atmosphere through natural decomposition.
A technology where biomass is used to generate energy, and the CO₂ produced is captured and stored underground, effectively preventing carbon from being released into the atmosphere.
The maximum amount of CO₂ that can be emitted while still limiting global warming to a specific target, such as 1.5°C set by the Paris Agreement.
A technology that captures CO₂ emissions from industrial processes or power generation and stores them underground to prevent them from entering the atmosphere.
Financial instruments that represent the reduction or removal of carbon dioxide from the atmosphere. These credits are issued to projects that reduce or remove greenhouse gas (GHG) emissions and are universally measured in metric tonnes of carbon-dioxide equivalent emissions (see tCO₂e).
A detailed, peer-reviewed framework that establishes the rules, procedures and requirements for how a carbon project must quantify its climate impact, demonstrate additionality, and monitor its performance in order to earn carbon credits. Registries and other organizations develop methodologies that set specific standards for different types of carbon projects.
The total amount of GHG emissions, measured in metric tonnes of carbon-dioxide equivalent emissions (tCO₂e), emitted directly or indirectly by an individual, organization, or product.
Trading systems where carbon credits are bought and sold, helping companies or countries meet their emissions reduction targets. Both voluntary and compliance (required) markets currently exist.
A state where an entity balances its carbon emissions with an equal amount of carbon credits (from either emissions reductions or removals projects).
Also known as carbon offsetting — actions taken to offset unavoidable carbon emissions, usually through the purchase of carbon credits or other similar instruments.
A regulated carbon trading system where certain entities (typically from high-emitting industries) are legally required to reduce or offset their emissions. There are many different compliance markets throughout the world, each with their own rules and trading mechanisms.
Developed by the ICVCM, the Core Carbon Principles are ten fundamental, science-based principles for identifying high-quality carbon credits that create real, verifiable climate impact.
A technology that extracts CO₂ directly from the air, offering a way to remove and store atmospheric carbon.
The error of counting the same carbon credit more than once, typically under different accounting schemes. Double counting can undermine the credibility of carbon credits and the projects that generate them.
The issuance of two or more carbon credits for the same emissions reduction, compromising the integrity of carbon markets.
Sometimes referred to as permanence, durability refers to the longevity of carbon sequestration. In carbon markets, it highlights how long the CO₂ will remain stored without being released back into the atmosphere.
The total greenhouse gas emissions resulting from the production, transportation, and disposal of materials used in construction or manufacturing.
Gasses such as CO₂, methane (CH₄), and nitrous oxide (N₂O) that trap heat in the Earth's atmosphere, contributing to climate change.
The practice of falsely marketing products, services, or actions as environmentally friendly or sustainable, while having overstated or minimal environmental impact.
The widely used international accounting framework for measuring and managing greenhouse gas emissions at the corporate level. The GHG Protocol organizes emissions by Scope 1, Scope 2, and Scope 3 emissions.
A nonprofit governance body working to ensure the integrity of the voluntary carbon market by developing high-quality standards for carbon credits.
A sustainability strategy where a company invests in carbon reduction or sequestration projects within its own supply chain, reducing its emissions and overall carbon footprint.
A financial value a company sets for each tonne of carbon it emits, with the goal of integrating the costs of carbon into business decision-making and incentivizing climate action.
The process by which verified carbon credits are issued to a project after it demonstrates the successful reduction or removal of CO₂ emissions.
Projects that divert landfill gas to generate energy, reducing methane emissions.
A methodology for assessing the environmental impacts associated with all stages of a product's life, from raw material extraction through disposal.
The importance of certain environmental, social, and governance (ESG) factors to stakeholders and their impact on a company's performance or decisions.
Efforts to reduce or prevent GHG emissions, either by reducing emissions at the source or through carbon removal activities.
A state where an entity's GHG emissions are balanced by carbon removal from the atmosphere. To accomplish this, GHG emissions must first be reduced as much as possible, and then hard-to-abate emissions are neutralized with carbon credits.
The act of compensating for carbon emissions by purchasing carbon credits that fund projects reducing or removing emissions outside its own value chain.
The carbon emissions of a building or structure while it is in use.
From the University of Oxford, the Oxford Offsetting Principles provide best practices and guidelines for ensuring that carbon offsetting supports achieving net-zero emissions.
Projects that eliminate harmful chemicals that destroy the ozone layer and are potent GHGs.
An international treaty, negotiated by 196 parties and adopted in 2015, aimed at limiting global warming to well below 2°C, with efforts to keep it to 1.5°C above pre-industrial levels.
A type of wetland that stores large amounts of carbon. Projects protecting or restoring peatlands help sequester carbon and prevent it from being released into the atmosphere.
See Durability — the longevity of carbon sequestration, or how long CO₂ remains stored without being released back into the atmosphere.
The process of lowering the amount of GHG emissions released into the atmosphere.
A framework for reducing emissions from deforestation and forest degradation while fostering conservation and sustainable management of forests. Also commonly used as a synonym for avoided deforestation projects.
The process of regenerating tree cover in an area that had previously been either mostly or completely deforested. Reforestation can be active, where people plant seeds or saplings, or passive, where people remove the barriers preventing natural regeneration. One of the project activity types under the blanket term ARR.
A system that tracks carbon credits from issuance to retirement, ensuring credits are not double-counted or fraudulently issued. The four largest registries are operated by Verra, Gold Standard, Climate Action Reserve (CAR), and ACR (previously American Carbon Registry).
Carbon credits that represent carbon dioxide physically removed from the atmosphere, typically through sequestration projects like afforestation or direct air capture.
A tradeable certificate generated for every megawatt-hour (MWh) of electricity generated from a renewable energy resource. Companies can purchase RECs to reduce nonrenewable energy consumption, primarily for Scope 2 emissions.
The process of permanently removing carbon credits from circulation once they've been used, preventing them from being resold or double-counted.
The process of restoring any type of native vegetation to a degraded or barren area.
An organization that developed the Corporate Net-Zero Standard to help companies set emissions reduction targets in line with the goals of the Paris Agreement.
Direct emissions from owned or controlled sources, such as fuel combustion in company-owned vehicles or factories.
Indirect emissions from the consumption of purchased electricity, steam, heating, or cooling.
All other indirect emissions across a company's value chain, including emissions from suppliers, logistics, and the use of sold products.
The process of capturing carbon dioxide from the atmosphere and durably storing it, either through natural processes or technology.
The guidelines and criteria used to measure and verify carbon credits, with the goal of ensuring consistency and quality across projects. Four of the largest standard bodies are Verra, Gold Standard, Climate Action Reserve, and ACR.
A collection of 17 global goals set by the United Nations, aimed at addressing issues like poverty, inequality, and climate change by 2030.
A standard unit of measurement used for converting different GHG emissions to CO₂ equivalences for comparison purposes.
A third-party assessment process to ensure carbon offset projects deliver real, measurable, and permanent reductions in greenhouse gas emissions as claimed. During verification, an auditor rigorously reviews a project's data and documentation and performs field visits to confirm it has met its methodology requirements and accurately quantified its GHG impacts.
The year in which a carbon credit is issued or when the associated emissions reductions occurred.
A market where companies, organizations, and individuals voluntarily purchase carbon credits to offset their emissions or otherwise drive BVCM. Unlike compliance markets, participation in the VCM is not mandated by government regulation but undertaken voluntarily — motivated by internal goals, stakeholder pressure, or other non-regulatory factors.
A global initiative aimed at ensuring transparency, accountability, and integrity in the VCM. VCMI develops guidelines and frameworks to help companies make credible claims about their carbon offset activities and ensure that credits meet high-quality standards, align with the Paris Agreement, and drive real climate impact.
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