Reference

Carbon market glossary

The terms used across carbon credits, registries, climate policy and removal, explained in plain language.

A

Additionality: The test that a carbon reduction would not have happened without the revenue from carbon credits. A project that would have gone ahead anyway is not additional, and its credits do not reduce emissions.
ARR (afforestation, reforestation and revegetation): A forest project type that plants or restores trees on land that was not recently forested. Carbon is stored in the growing biomass and soils over decades.

B

Baseline: The estimate of what would have happened without the project. Credits are the difference between the project's measured emissions or removals and this baseline.
BECCS (bioenergy with carbon capture and storage): A removal approach that burns biomass for energy, captures the CO₂ from the process and stores it underground. The net effect can be removal if the biomass was grown sustainably.
Biochar: A stable, carbon-rich charcoal made by heating biomass with little or no oxygen. When it is added to soil it can keep carbon stored for a long time, which is why it is used as a carbon removal method.
Blue carbon: Carbon stored by coastal and marine ecosystems such as mangroves, seagrass meadows and salt marshes. These ecosystems can store carbon in their soils at high density.
Buffer pool: A share of credits held back by a registry from forest and land projects. If carbon is later lost to fire, disease or other reversals, credits from the buffer pool can be cancelled to cover the loss.

C

Carbon credit: A unit representing one tonne of carbon dioxide equivalent that has been reduced, avoided or removed. It is issued by a registry after independent verification and can be retired to support a climate claim.
Carbon removal (CDR): Activities that take CO₂ out of the atmosphere and store it for the long term. Examples include direct air capture, biochar, enhanced weathering and reforestation. Removal is different from avoiding emissions.
CBAM (Carbon Border Adjustment Mechanism): An EU mechanism that applies a carbon price to certain imported goods, such as steel, cement and fertiliser, so that imports face a cost similar to domestically produced goods.
Core Carbon Principles (CCP): Integrity principles set by the Integrity Council for the Voluntary Carbon Market. Credits that meet them can carry a CCP label, which signals high integrity to buyers.
Corresponding adjustment: A step under Article 6 of the Paris Agreement in which a host country adds back the emissions reduction it transferred abroad. This prevents the same tonne being counted by both countries.
CORSIA: The Carbon Offsetting and Reduction Scheme for International Aviation, run by the International Civil Aviation Organization. Airlines must offset growth in emissions on international routes using eligible emissions units.

D

DAC (direct air capture): Technology that captures CO₂ directly from ambient air using chemical sorbents or solvents. The captured CO₂ is then stored, usually geologically. It is energy-intensive and costly, and currently at an early stage of deployment.

E

Enhanced weathering: Spreading finely ground silicate rock on land or in the sea so that natural chemical reactions draw CO₂ out of the air over time. Measuring how much CO₂ is locked in is the main challenge.
EU ETS (EU Emissions Trading System): The European Union's cap-and-trade scheme for power, industry and aviation. The total number of allowances is capped and reduced over time, and companies must surrender allowances for their emissions.
EUA (EU Allowance): A tradable allowance under the EU ETS. One EUA gives the right to emit one tonne of CO₂ equivalent under the scheme. EUA prices are a benchmark for European carbon pricing.

F

Forward contract: An agreement to buy or sell credits at a set price for delivery at a later date. Buyers use forward contracts to secure supply from projects that have not yet issued credits.

G

Gold Standard: A voluntary standard for carbon projects that places particular weight on sustainable development benefits, such as health, energy access and gender equality. Projects must show how they contribute to the UN Sustainable Development Goals.

I

ICVCM (Integrity Council for the Voluntary Carbon Market): An independent body that sets integrity standards for voluntary carbon credits through its Core Carbon Principles and assesses methodologies against them.
Insetting: Reducing or removing emissions within a company's own value chain, for example on its supplier farms. Insetting is different from offsetting, which takes place outside the company's own activities.
ITMO (Internationally Transferred Mitigation Outcome): A unit of emissions reduction transferred between countries under Article 6.2 of the Paris Agreement. Each transfer requires a corresponding adjustment by the host country.

L

Leakage: Emissions that move outside a project's boundary as a result of the project. For example, if logging is pushed into a neighbouring forest, the project's gains are partly offset by the new losses.

M

Methane capture: Capturing methane from sources such as landfills, livestock manure or oil and gas operations, then flaring it or using it for energy. Methane is a much more potent greenhouse gas than CO₂, so capturing it has a large effect per tonne.
MRV (monitoring, reporting and verification): The process of measuring a project's emissions reductions or removals, reporting the data in line with the methodology, and having an independent body verify it. MRV is the foundation of credit integrity.

N

Nature-based solution: An action that protects, restores or manages ecosystems, such as forests, wetlands and soils, to store carbon and bring other benefits, such as biodiversity and water regulation.
NDC (Nationally Determined Contribution): A country's climate target under the Paris Agreement, set out in its own plan. NDCs are the basis for how countries account for emissions and for any transfers under Article 6.
Net zero: A state in which the greenhouse gases added to the atmosphere are balanced by those removed. Net zero targets usually require deep cuts in emissions first, with carbon removal used only for the remainder.

O

Offset (carbon offset): A credit used to compensate for emissions made elsewhere. Offsets are only as credible as the methodology, additionality and permanence behind them.
Offtake agreement: A long-term contract in which a buyer agrees to purchase the output of a project, often used to finance new carbon removal projects before they operate.

P

Permanence: How long stored carbon stays out of the atmosphere. Forest carbon is less permanent than geological storage because fire, drought, pests or logging can release it.
Project design document (PDD): The document that describes a carbon project, the methodology it follows, its baseline, its monitoring plan and the expected reductions. Auditors check projects against it.

R

REDD+: Reducing emissions from deforestation and forest degradation, plus conservation, sustainable forest management and enhancement of forest carbon stocks. It is a framework from the UN climate process that projects use to generate credits.
Registry: The database where credits are issued, held, transferred and retired. Each credit has a serial number so it can be traced and cannot be counted twice.
Retirement: The final step in a credit's life, in which it is cancelled in the registry so it cannot be sold or used again. A retired credit supports the buyer's claim.

S

SBTi (Science Based Targets initiative): An initiative that sets standards for companies' emissions targets. SBTi does not allow carbon credits to count toward a company's near-term science-based targets, but credits can be used for other climate claims.
Scope 1, 2 and 3 emissions: Scope 1 covers direct emissions from a company's own sources, scope 2 covers purchased energy, and scope 3 covers the rest of the value chain. Scope 3 is often the largest part of a company's footprint.
Spot market: A market in which credits are bought and sold for immediate delivery at the current price, in contrast to forward contracts.

V

Validation: The independent check of a project's design before it starts, against the requirements of its standard. Validation does not confirm that reductions have happened, only that the project is set up to measure them.
Verification: The independent audit of a project's measured emissions reductions for a monitoring period. A verification report is the basis for issuing credits.
Verra: The organisation that runs the Verified Carbon Standard (VCS), the largest voluntary carbon standard by credits issued, and its registry.
Vintage: The year in which the emissions reduction or removal took place. Buyers often look at the vintage to judge how recent the reduction is and which rules applied at the time.
Voluntary carbon market (VCM): The market in which companies, governments and individuals buy carbon credits to meet their own targets or claims, outside of mandatory schemes. Rules come from private standards and registries.
VVB (validation and verification body): An independent, accredited auditor that validates project designs and verifies reductions. Its accreditation and independence from the project developer are key checks for buyers.