Carbon 101

What are carbon credits?

A carbon credit represents one metric tonne of carbon dioxide (CO₂) that has been removed from the atmosphere or prevented from being emitted. The simple equation:

1 carbon credit = 1 tonne CO₂ removed or avoided

When you purchase and retire a carbon credit, you're funding projects that either capture CO₂ from the atmosphere (like reforestation) or prevent emissions that would otherwise occur (like renewable energy replacing fossil fuels).

Credits are issued by independent standards bodies, tracked on public registries, and retired permanently when used — ensuring no double counting.

Avoidance vs Removal credits

Not all carbon credits work the same way. Understanding the difference helps you make better procurement decisions.

🌱 Removal Credits

What they do: Actually remove CO₂ from the atmosphere

Examples: Reforestation, direct air capture, biochar, enhanced weathering

Permanence: Higher risk of reversal (fires, disease)

Price: Generally more expensive ($15–50+ per tonne)

⚡ Avoidance Credits

What they do: Prevent emissions that would otherwise occur

Examples: Renewable energy, methane capture, energy efficiency

Permanence: Immediate and permanent impact

Price: Generally less expensive ($5–25 per tonne)

Standards explained

Carbon standards set the rules for how projects are designed, verified, and issued credits. Choosing the right standard matters for credibility and compliance.

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Verra VCS

The world's largest voluntary carbon market registry. Rigorous methodology, strong governance, transparent registry system.

70%+ market share1.5B+ credits issued

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Gold Standard

Premium certification focusing on sustainable development co-benefits. Higher prices but stronger social impact verification.

Premium pricingSDG alignment

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CDM / Article 6

UN Clean Development Mechanism. Established under Kyoto Protocol, now transitioning to Article 6 of the Paris Agreement.

UN frameworkGovernment oversight

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BEE India CCTS

India's domestic carbon credit trading scheme. Mandatory for energy-intensive industries under the PAT framework.

Compliance marketIndia-specific

How verification works

Every legitimate carbon credit goes through a rigorous multi-step verification process before being issued. Here's how it works:

1

PDD Development

Project Design Document outlines methodology, baseline, monitoring plan

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2

Validation

Third-party auditor verifies project design meets standard requirements

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3

Registration

Standard body approves project and assigns unique identifier

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4

Monitoring

Project collects emission reduction data per monitoring plan

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5

Issuance

Credits issued to registry account after independent verification

India Carbon Credit Trading Scheme (CCTS)

Launched in 2023, India's CCTS is a compliance carbon market administered by the Bureau of Energy Efficiency (BEE). Here's what Indian companies need to know:

Who's covered?

Thermal power plants
Steel, cement, aluminum industries
Refineries and petrochemicals
Companies with energy consumption >10,000 TOE/year

How it works

Mandatory energy efficiency targets
Trade surplus certificates
Penalties for non-compliance
Integration with PAT scheme

Voluntary vs Compliance markets

🎯 Compliance Markets

Purpose: Meet regulatory requirements

Buyers: Companies with legal obligations

Examples: EU ETS, California Cap-and-Trade, India CCTS

Price: Higher, driven by regulatory demand

🌱 Voluntary Markets

Purpose: Voluntary climate commitments

Buyers: Companies, individuals, organisations

Examples: Verra VCS, Gold Standard

Price: Variable, market-driven

How to choose the right credit

Six criteria every procurement decision should be evaluated against:

01

Additionality

Would the project happen without carbon finance? Look for projects that clearly wouldn't be financially viable otherwise.

02

Permanence

How long will the emission reductions last? Renewable energy is permanent; forests can burn.

03

Verification

Is the project independently audited? Look for third-party verification by accredited bodies.

04

Co-benefits

Does the project deliver social or environmental benefits beyond carbon? Biodiversity, jobs, water quality.

05

Vintage

When were the emission reductions achieved? Recent vintages are generally preferred by buyers and auditors.

06

Geography

Where is the project located? Consider local regulations, political stability, and community support.

Greenwashing red flags to avoid

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Prices too good to be true

Credits under $5/tonne are usually low quality or have additionality issues.

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No registry serial numbers

Legitimate credits have unique serial numbers on public registries.

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Vague project descriptions

Avoid credits without clear project details, methodology, and location.

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No third-party verification

Self-certified or internally verified credits lack credibility.

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Double counting risks

Ensure credits aren't also counted toward the host country's NDC.

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Outdated vintages

Credits from 2010–2015 may not meet current quality standards.

Frequently Asked Questions

The terms are often used interchangeably. Technically, a carbon credit is the tradeable certificate, while offsetting is the act of using credits to compensate for your emissions. You buy credits to offset emissions.

You need to offset 100% of your annual emissions. First measure your carbon footprint (Scope 1, 2, and 3), then purchase and retire credits equal to that amount. Most companies add a 10% buffer for measurement uncertainty.

Not inherently, but quality varies dramatically. High-quality credits from verified projects with strong additionality can drive real climate impact. The key is rigorous due diligence and choosing credits from reputable standards like Verra VCS or Gold Standard.

Always prioritise emission reductions first. The hierarchy is: 1) Avoid emissions, 2) Reduce emissions, 3) Offset residual emissions. Offsets should complement, not replace, your reduction efforts.

Typically 18–36 months from project start to first credit issuance. This includes PDD development (3–6 months), validation (6–12 months), registration (2–4 months), and monitoring period (6–18 months).

For India CCTS compliance, you must use domestic credits issued under the BEE framework. International credits (Verra, Gold Standard) can be used for voluntary commitments but not regulatory compliance.