Skip to main content
Marsh logo

Voluntary Carbon Credits glossary

Carbon credit glossary

Term Definition
Additionality An additional carbon project is one that would not have occurred without the incentive provided by carbon credit revenues. A high quality carbon credit is one that has been proved to result in additional emissions reductions or removals beyond what would have occurred under a business-as-usual scenario.
Afforestation Establishing new forests to remove carbon dioxide from the atmosphere
Agroforestry Incorporating forestry into farming landscapes to remove carbon dioxide from the atmosphere
Article 6 Article 6 is a subsection of the Paris Agreement, which was established during COP26. It establishes guidelines for the international markets used by the 193 signatories of the Paris Agreement to achieve their emission reduction targets or Nationally Determined Contributions (NDCs).
Avoidance The practice of preventing the emission of carbon in the first place, for example via switching to renewable energy resources from fossil fuel sources, and switching from ocnventional system to energy efficient ones (e.g. cookstoves).
Biochar A method of removing carbon dioxide from the atmosphere. Heating biomass in a pyrolysis machine creates biochar, which can be applied to land or materials to store the contained carbon
Bioenergy with Carbon Capture and Storage (BECCS)  A method of removing carbon dioxide from the atmosphere. The process of capturing and permanently storing carbon dioxide (CO2) from biomass (organic matter) energy generation.
Blue Carbon  A method of avoiding or reducing volumes of carbon dioxide from the atmosphere. Carbon that is captured from the atmosphere and stored in marine ecosystems (i.e. mangroves, saltmarshes), where management of those ecosystems impacts that carbon. 
Buffer pool Carbon credit buffer pools hold non-tradable "buffer" carbon credits, which act as a safeguard against the non-permanence risk associated with carbon offset projects. These buffer credits are consolidated into a single account that covers multiple projects. In the event of a reversal, buffer credits are cancelled to protect the carbon that is known or suspected to be lost. The permanence of the program is maintained as long as the buffer pool remains financially stable.
Cap-and-trade A pricing approach used in several compliance markets where a regulator determines a ‘cap’ (or a limit) to the level of emissions, and market participants trade credits according to demand. 
Carbon Capture and Storage (CCS) A technology that aims to capture carbon dioxide (CO2) emissions from industrial processes or power generation and store them underground or use them for other purposes
Carbon credit One credit = a transferable token issued by a carbon credit rating agency, representing one ton of carbon or equivalent greenhouse gas (ton CO2e) reduced from the atmosphere
Generating carbon credits are a way for businesses to compensate for the CO2e emissions they could not reduce in a given year. These are external activities that reduce GHG emissions or increase carbon sequestration.
Carbon offsets are bought and sold as credits, applying a trading system at a price determined by the market.
Carbon Credit Delivery Date The carbon credit delivery date is the date a carbon credit will be available for purchase on the market.
Carbon Credit Vintage The vintage of a carbon credit refers to the year it was issued. It's important to note that the vintage year of an offset may not always align with the year of the transaction, and in some cases, the vintage year may even be in the future.
Carbon market Carbon markets are trading systems where carbon credits are priced, and then bought or sold. 
The main distinction is between compliance markets (where activity is and pricing is run and regulated by governments and public bodies) and voluntary markets (which are unregulated and activity is not compulsory).
Carbon sink A natural or man-made reservoir that collects and stores carbon-containing chemical components for an indefinite period, effectively reducing CO2 concentrations in the atmosphere. The ocean is the most important carbon sink on the planet.
Compliance market Compliance carbon markets are platforms where a specific quantity of carbon credits is allocated to companies on an annual basis by regulators or governments. These credits are mandatory, and companies are obligated to meet their requirements. Emissions Trading Systems (ETS) are a type of compliance market that uses a 'cap-and-trade' trading model.
Cookstoves A method of removing carbon dioxide from the atmosphere. Cleaner or less energy-intensive cookstoves can replace traditional equipment, thereby reducing or preventing generated carbon emissions. 
Corresponding Adjustment Corresponding Adjustments are necessary for the use of voluntary carbon market (VCM) credits in compliance markets such as CORSIA and other emissions trading schemes. Buyers who need to retire credits to offset their emissions face the risk of non-compliance if they utilize a credit that has not undergone a Corresponding Adjustment.
Direct Air Carbon Capture and Storage (DACCS) A method of removing carbon dioxide from the atmosphere. An engineered project which captures and filters carbon from the atmosphere, then stores it underground.
Double Counting Another important marker of a high quality credit is proven avoidance of double counting, meaning carbon credits are not accounted for twice or claimed by multiple parties. Robust accounting mechanisms and clear rules help prevent double counting.
Emissions The release of greenhouse gasses into the atmosphere.
Emissions Trading System (ETS) Also known as a cap-and-trade system. A market-based approach where a government or regulatory body sets a cap on the total amount of emissions that can be released by participating companies, which is typically reduced over time to encourage emission reductions.
Enhanced Rock Weathering A method of removing carbon dioxide from the atmosphere. Applying crushed rock on land to enable the natural sequestration and storage of carbon
Forward purchase An arrangement where an entity agrees to buy carbon credits in the future at a predetermined price and usually on a predetermined date
GHGs GHGs stands for greenhouse gases, which are gases that trap heat within the atmosphere. Common GHGs include methane, nitrous oxide, fluorinated gases, and carbon dioxide, which is one of the most recognizable GHGs and a primary contributor to global warming.
Green Carbon The reduction or removal of carbon dioxide emissions from the atmosphere through "green" activities such as reforestation, afforestation, carbon capture and storage, and renewable energy projects.
Greenwashing Using false or misleading marketing to exaggerate an organization’s environmental or sustainability activities.
ICVCM The Integrity Council for the Voluntary Carbon Market (ICVCM) is a governance body for the global voluntary carbon market which aims to establish a high-integrity market by setting and enforcing a universal benchmark for high-quality carbon credits - the Core Carbon Principles.
Insetting Insetting refers to when an offtaker buys and retires credits for activities within that offtaker's own value chain.
Invalidation When a credit that has previously been officially approved or "validated" by an issuing registry, and subsequently has this approval removed. Amongst other causes, invalidation can arise from claims of inconsistent methologies, fraud, error, regulatory change, Reversal, project failure, or additionality.
Issuance Following verification, carbon offsets are documented in a carbon registry system and credits are issued according to the verified reductions. At this point credits are ready for trading in the markets. 
Issuing Registry The entity responsible for overseeing the registration, verification, and issuance of carbon credits for the project is known as a carbon offset registry. There are four prominent voluntary offset project registries, namely the American Carbon Registry (ACR), Climate Action Reserve (CAR), Gold Standard, and Verra (VCS). These registries play a crucial role in tracking and monitoring the carbon credits generated by the project.
Kyoto Protocol An agreement signed in 1997 to reduce emissions of greenhouse gases down to designated targets in line with the UN Framework Convention on Climate Change through the issuance of carbon credits
Offsetting Companies can purchase and retire credits from activities that are not directly related to their operations in order to balance out their emissions. This means they can offset their own emissions by financially supporting projects that reduce emissions elsewhere. 
Offtaker An entity or organisation that purchases carbon credits. Depending on the entity's objectives, offtakers can range from buyers looking to sell their acquired credits for profit, such as commodity traders and other trading platforms, or tail end corporates looking to retire credits and offset their own emissions. 
Paris Agreement An agreement signed in 2015 by world leaders to cut down greenhouse gas emissions and restrict the increase in global temperature to less than 2°C above pre-industrial era levels by the end of the 21st century
Permanence Refers to the long-term durability of the carbon reductions achieved through carbon offset projects, which is one of the markers of a high quality carbon credit. It addresses the concern that the carbon stored or avoided by these projects may be released back into the atmosphere at a later time, potentially undermining the effectiveness of the offset.
Project Any activity that reduces or removes carbon emissions and generates certified carbon credits.
REDD+  Reducing Emissions from Deforestation and forest Degradation to avoid carbon dioxide being emitted into the atmosphere
Reforestation Replanting a forest to remove carbon dioxide from the atmosphere
Reversal When greenhouse gases sequestered by a carbon project are released back into the atmosphere. For a carbon credit, an instance of Reversal mitigates its offset effect (and potentially leading to invalidation of a corresponding issued credit).
Retire The process of permanently removing carbon credits from the market to prevent their resale after they have been used to their full capacity. Credits are typically assigned unique serial numbers and registered in an official registry.
Sequestration The capture, removal and storage of carbon dioxide from the atmosphere into a carbon pool.
Verification Carbon credit standards bodies (such as Verra or Gold Standard) examine the actual decrease in emissions from a project against the amount claimed by the developer. 
Voluntary Carbon Credit A carbon credit is a sellable token representing one ton of carbon or equivalent greenhouse gas (ton CO2e) that has been removed or avoided. Voluntary credits are those that are bought and retired on a non-mandatory basis, as opposed to compliance credits which are bought and retired to abide by national regional and/or international policy or regulation. 
Voluntary Carbon Market As opposed to the compliance markets, the voluntary carbon market is a trading system that enables the buying and selling of carbon credits on a voluntary basis. 
Wetland Management Projects that aim to conserve, restore or enhance ecosystems such as marshes, swamps or bogs to sequester carbon dioxide and reduce emissions.