How do Carbon Credits Actually Work? Removal, Reduction, and Avoidance Credits Explained

Oct 13, 2023

As urgency for climate action has hit an all-time high, trust in carbon credits has reached an all-time low. News reports highlighting the presence of low-quality credits have brought renewed scrutiny—and in some cases, greenwashing lawsuits—over the use of carbon credits to offset emissions. This has also increased the level of misleading, convoluted, or flat-out wrong information that is shared on carbon credits, what they represent, and how they should fit into an overall climate action plan. With worsening trust in carbon credits and the voluntary carbon market, companies are re-evaluating their strategies and commitments. Some are abandoning carbon credits altogether.

That’s a mistake. Despite the prevalence of junk credits on the voluntary carbon market, purchasing high-quality carbon removal credits remains one of the most efficient means of delivering climate benefits by rewarding good carbon removal projects. It’s also necessary. Our climate outlook demands large-scale carbon removal alongside reductions to meet global decarbonization targets. The challenge for credit buyers is knowing how to separate the real, impactful credits from those that are rubbish.

To help you better understand your carbon credit purchases, we’ve broken down the types of carbon credits available, how they work, and will explain how quality should be assessed for each type.

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