What Is a Carbon Credit? A Plain-English Guide

A carbon credit is a tradable certificate that represents one tonne of carbon dioxide equivalent (CO₂e) either avoided or removed from the atmosphere. In practice a credit lets a buyer take responsibility for emissions they cannot yet eliminate by funding a verified climate benefit somewhere else. The unit is deliberately simple — one credit, one tonne — but the quality behind that tonne is not. What gives a credit real value is how it was measured, whether an independent standard verified it, and whether it was permanently retired so the same tonne can never be sold or claimed twice.

How a carbon credit is created and verified

• A project acts. A developer runs an activity that either prevents emissions, such as protecting a standing forest, or pulls carbon out of the air, such as growing new trees.
• The impact is measured. The tonnes of CO₂e are quantified against a baseline — what would realistically have happened without the project.
• An independent standard verifies it. Bodies such as Verra and Gold Standard audit the methodology and evidence before any credits are issued.
• Credits are issued, then retired. Each verified tonne gets a serial number on a public registry and becomes a real claim only once it is retired against a single buyer.
• The claim stays traceable. Anyone can look up the retired serial number, which is what stops one tonne being counted by several parties.

Two systems, one confusing word

"Carbon credit" describes two different instruments, and conflating them causes most of the confusion in the market:

• Compliance allowances exist inside regulated schemes such as the EU Emissions Trading System. A government issues a fixed number of permits to emit, and covered installations must surrender one per tonne emitted. The cap is the policy; the price is the consequence.
• Voluntary carbon credits are issued to specific projects for tonnes reduced or removed against a baseline, verified independently, and bought by organisations under no legal obligation to do so.

Almost everything a company buys to "offset" is the second kind. If a supplier is vague about which they are selling, that is itself a useful signal. The distinction is unpacked further in carbon credits vs carbon offsets.

Avoidance credits versus removal credits

This is the distinction that matters most, and the one most often blurred. An avoidance (or reduction) credit stops a tonne from being emitted — it slows the problem but adds nothing back to the ledger. A removal credit physically takes a tonne of carbon out of the atmosphere and stores it in trees, soil, or rock. Both can be legitimate, but they are not interchangeable, and in a footprint report, mixing the two can make progress look larger than it really is. If you want to see what sits behind each type, our explainer on verified carbon credits sets out exactly what "verified" should guarantee.

What decides a credit's price

There is no single price of carbon, because a credit is a claim on a specific project rather than a commodity:

• Project type — removals cost more than avoidance; engineered removals cost far more than nature-based ones.
• Vintage — the year the tonne was verified. Recent vintages generally command more, since buyers discount credits issued under superseded methodologies.
• Co-benefits — verified community and biodiversity outcomes add a premium.
• Geography and volume — some regions are in higher demand, and larger purchases price better.

Ranges and what they buy are set out in how much carbon offsets cost.

How to check a credit is what it claims

1. Ask for the serial numbers and look them up in the public registry. A genuine retirement names the beneficiary and cannot be reversed.
2. Ask which methodology and version the project used, not just which registry certified it — quality now varies far more between methodologies than between standards.
3. Check the vintage and ask why, if it is old.
4. For forestry, ask about the buffer pool and the monitoring plan that covers fire, disease and reversal.
5. Confirm the retirement timeline in writing before you pay.

The failure mode to avoid is buying a credit nobody can look up. If it cannot be verified by a third party, it cannot safely go in your report.

How businesses buy, retire, and use credits

Most companies begin by measuring, because you cannot credibly offset what you have not counted. A free tool such as the Evertreen CO₂ calculator turns activity data into an estimated footprint, and the business then buys credits equal to the tonnes it wants to cover. Crucially, the purchase becomes a genuine claim only when the credit is retired in your name on the registry — buying without retiring leaves the tonne available for someone else to count. Retirement is the step that turns a receipt into an accountable outcome, and credible buyers cut their own emissions first, using quality credits for the remainder rather than as a licence to keep polluting.

One accounting note worth stating plainly: under the SBTi corporate net-zero standard, credits do not count towards emission-reduction targets. They sit outside the target, with removals neutralising residual emissions at net zero.

Buying credits versus planting trees directly

An audited credit gives you a documented tonne today; planting gives you a visible, growing removal you can follow for years. With Evertreen you can combine both: certified Verra and Gold Standard credits are available on request when you need registry-grade tonnes, while geolocated, traceable trees from £1.5 per tree act as a complementary, long-term removal you can watch on a map. The goal is not to crown one label the winner but to match the tool to the claim — audited tonnes now, or a real tree putting down roots and adding removal over time.

Frequently asked questions

Does one carbon credit always equal one tonne of CO2? Yes. By definition one credit equals one tonne of CO2 equivalent. What varies is quality: how the tonne was measured, whether an independent standard verified it, and whether it was retired.

What does retiring a carbon credit mean? Retiring permanently cancels the credit on its registry and assigns the tonne to a single buyer, so it cannot be resold or double-counted. Until a credit is retired, the climate claim is not complete.

What is the difference between avoidance and removal credits? Avoidance credits prevent emissions that would otherwise happen, while removal credits take carbon dioxide out of the atmosphere and store it. Both can be useful, but they should be reported separately rather than treated as equal.

Who issues carbon credits? Independent standards such as Verra and Gold Standard issue credits to projects after third-party auditors validate the design and verify the results.

Can individuals buy carbon credits? Yes, usually through a provider that aggregates and retires on their behalf, since registries are set up for institutional accounts.

Are carbon credits the same as an EU ETS allowance? No. An allowance is a government-issued permission to emit within a regulated cap, while a voluntary credit is issued to a project for a verified tonne reduced or removed.

How do I avoid buying a worthless credit? Insist on registry serial numbers you can look up, ask for the methodology and vintage, and treat a price far below the market for that project type as a question rather than a bargain.