What exactly are carbon credits?

Carbon credits, also known as carbon offsets, are permits that allow the holder to emit one tonne of carbon dioxide equivalent (CO2e). They are generated by projects that reduce, remove, or avoid greenhouse gas emissions from the atmosphere.

How do carbon credits work in practice?

Entities that reduce or remove greenhouse gases beyond a baseline can generate credits. These credits are then verified and sold to other entities, typically companies or nations, looking to offset their own unavoidable emissions to meet regulatory targets or voluntary sustainability goals.

What is the difference between compliance and voluntary carbon markets?

Compliance markets are regulated by government policies (e.g., cap-and-trade schemes) where participants *must* meet emission reduction targets. Voluntary markets operate outside regulatory mandates, allowing individuals and organizations to voluntarily purchase credits to offset their carbon footprint.

What are the main criticisms of carbon credits?

Criticisms often focus on issues of 'additionality' (would the project have happened anyway?), 'permanence' (are the reductions truly long-lasting?), and potential for 'greenwashing' if not rigorously verified. Concerns also exist about social and environmental impacts of some offset projects.