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Carbon credits are recognised tools for investing in projects that contribute to reducing the amount of greenhouse gases in the atmosphere. This is done by either removing or avoiding emissions that would otherwise have occurred.

Each carbon credit represents the avoidance or removal of one metric tonne of greenhouse gas emissions from the earth’s atmosphere. Not all carbon credits are created equal. Some are much higher quality than others.

‘Carbon offsetting’ is the act of purchasing carbon credits to invest in environmental projects around the world as part of a company’s broader decarbonisation journey, to help reduce their often unavoidable, immediate carbon emissions.

In addition to reducing or removing greenhouse gas emissions, carbon projects have other benefits, such as:

• Social, health and cultural: employment for local people, improved health and education, and access to clean and affordable energy.
• Environmental: protecting biodiversity, maintaining habitat for native species, improved air and water quality, and re-establishing vegetation on cleared land.
• Economic: employment and community empowerment, improved infrastructure and increased economic activity.

Carbon credits are generated by a range of project types, including:

• Nature-based solutions
• Indigenous projects
• Community and clean cooking
• Renewable energy

Carbon credits are issued under different standards, each with its own rules and verification requirements. The main types are:

• ACCUs: Australian Carbon Credit Units, issued by the Australian Government’s Clean Energy Regulator.
• CERs: Certified Emissions Reductions, from projects under the UN’s Clean Development Mechanism.
• VCUs: Verified Carbon Units, from projects under Verra’s Verified Carbon Standard.
• VERs: Verified Emissions Reductions, from projects under the Gold Standard.

The usual criteria for assessing quality are:

• Baseline: the background level of emissions the project is measured against.
• Additionality: the reduction or removal wouldn’t have happened without the project.
• Leakage: the project doesn’t cause emissions to increase elsewhere.
• Permanence: the reduction or removal is sustained over time.

High-quality projects are also independently verified and accredited under recognised standards such as the Verified Carbon Standard or Gold Standard.