Carbon tends to sit at the forefront of climate considerations, but there’s another important, interconnected piece of the sustainability puzzle that often gets overlooked: water.
Globally, 4 billion people face severe water scarcity for at least one month out of every year, according to the United Nations University Institute for Water, Environment and Health (UNU-INWEH).
Like with global warming, human activities have had a major impact on water systems. Not only are we often using too much water, but issues like land use change and rising temperatures also stress freshwater ecosystems and the water cycle.
If we ignore these issues, more water systems will be permanently damaged. That likely means more people will live with insufficient access to clean water, agricultural production will become more difficult and expensive, and many businesses will face economic risks, like supply chain delays and shortages.
Fortunately, there are ways to reduce water risks and even improve water systems.
One option is to purchase water credits. Similar to how carbon credits emerged as a solution for offsetting hard-to-avoid greenhouse gas emissions, water credits provide a market-based solution for conserving and restoring water systems.
Here, we’ll take a deeper dive into:
- What are Water Credits?
- How do Water Credit Projects Work?
- Water Credit Project Types and Examples
- Benefits of Water Credits
- Why Individuals and Businesses Should Buy Water Credits
What Are Water Credits?
If you’re familiar with carbon credits, you already get the gist of water credits.
Similar to how one carbon credit represents one metric ton of carbon dioxide equivalent avoided or removed from the atmosphere, one water credit represents 1,000 gallons of natural freshwater flow that has been improved or restored.
Water credit projects involve protecting, restoring, or conserving water flows to ultimately help natural systems like rivers, wetlands, and aquifers, along with the communities that rely on them.
Source: Bonneville Environmental Foundation
For example, leading project developer Bonneville Environmental Foundation (BEF) issues Water Restoration Certificates® that are third-party verified, namely by Watercourse Engineering or the National Fish and Wildlife Foundation. All BEF WRC® projects are also tracked and registered on S&P Global’s Markit registry to avoid double-counting.
Other water credit programs exist, but BEF WRCs® are arguably the most established market-based solution for addressing your water footprint.
Terrapass offers BEF WRC® certificates that support projects like the Middle Deschutes River Flow Restoration project in Oregon, which in turn helps support a healthy ecosystem for local wildlife and communities.
Buy BEF WRCs® through Terrapass today.
How Do Water Credit Projects Work?
Water credit projects work similarly to carbon credit projects in terms of directing financing toward initiatives that support the restoration of natural freshwater flows and ecosystems.
Water restoration project developers like BEF work with farmers, conservation groups, and local irrigation districts to identify these opportunities and manage the projects. Water restoration projects also meet additionality requirements, meaning that without the funding from water credits, the projects would not be possible.
For example, funding might go towards the cost and effort of securing legal agreements that help restore river flows. This is necessary to help overcome challenges like “use it or lose it” water rights policies in the Western U.S. By maintaining a water source for ecological purposes, water rights holders can maintain their water rights while addressing old and inefficient requirements like the obligation to use all of their allotted water.
Note that since water issues are largely regional, best practice is to purchase credits from water restoration projects that help relieve water stress in the same basins where you’re using water. However, water credit projects are mostly concentrated in the Western U.S. where water stress is more severe, so matching projects to your location isn’t always possible. If that’s the case, buying a mixed portfolio of water credits can still compensate for your impact, it just might not directly address water issues in the areas you operate.
Water Credit Timing
Each water credit directly translates to 1,000 gallons of natural freshwater improved or restored over an 18-month cycle.
Note that while these projects might provide long-lasting water benefits, along with other associated environmental and social benefits, best practice is for buyers to only count water credits against their water footprint for the year in which these certificates are purchased.
To address your water footprint for multiple years, buyers can purchase water credits for each year they want to balance their water impact, similar to how you would purchase carbon credits corresponding to each year’s emissions.
Also note that water credits have vintages, which refer to the primary year when the water restoration took place. Like with carbon credits, best practice for water credits is to buy ones with recent vintages — generally within the last five years, but ideally within the past three. However, you don’t have to match vintages with the year of your own water consumption, as you’re still funding water improvements that help balance your own footprint.
Water Credit Project Types and Examples
BEF WRC® projects fall into one of three main categories:
- Restoring Flows: These projects often involve legal transactions like water rights transfers and partnerships with local groups to help keep water flowing in rivers and streams, rather than overly diverted, like for inefficient agricultural practices.
Example — Jordan River Flow Restoration: This project uses Environmental Water Transactions (EWTs) to help secure more water flowing from the Jordan River into the Great Salt Lake in Utah, which helps address the critical shrinking of this lake.
- Restoring Natural Systems: While similar to restoring flows, this project category focuses more on physical interventions to help restore freshwater systems like rivers and wetlands to their natural state, thereby increasing freshwater and potentially providing co-benefits like cleaner water.
Example — Pine Tree Brook Dam Removal: This project removes dams in the Pine Tree Brook in the Boston area to support the movement of local trout and improve water quality. For example, one of the dams on this brook was previously put in place to create a local ice rink, but that was no longer needed due to the 1950s construction of a nearby ice rink facility that does not rely on this water source. So, removing it helped return the brook to more of its natural order.
- Improving Efficiency: Some water credit projects focus more on conservation and efficient water use, which can thereby help retain or restore water in natural systems.
Example — Mason Lane Headgate: In Arizona, the Mason Lane Ditch diverts a tributary of the Verde River to irrigate agricultural land. This project funds the replacement of an inefficient headgate system with a modern, automated one to enable more precise control of the diverted water.
Benefits of Water Credits
In addition to directly supporting freshwater restoration, water credits provide a wide range of co-benefits, such as supporting:
- Groundwater conservation: Projects that minimize groundwater usage not only can improve water volume but also provide benefits like stabilization of river beds. That helps to avoid problems like sinking land and enables water systems to maintain natural filtration capabilities.
- Biodiversity: Water restoration projects often support biodiversity, like providing a healthier habitat for local fish and bird populations. That can provide associated environmental and economic benefits, like supporting pollinators and keeping local fisheries well-stocked.
One example of biodiversity co-benefits can be seen in the Merced County Seasonal Wetland Habitat project, which aims to provide an annual spring habitat for migratory birds in central California.
You can support projects like these by buying BEF WRCs® through Terrapass today.
- Recreation: Maintaining freshwater ecosystems helps provide communities with recreational opportunities, such as fishing, boating, and hiking. That can correlate with economic opportunities for these areas, while also supporting the health of local populations.
- Agricultural economies: The funding from water credits can directly support farmers and ranchers, providing an important income stream that can help mitigate issues like crop shortages. Long term, water credits can also support a more stable water supply that sustains these agricultural businesses season after season, even amidst increasing floods and droughts caused by climate change.
- Community empowerment: Water credits often involve working with tribal groups and other local communities. The economic, ecological, and recreational benefits can help protect these communities’ cultures and rights.
- Lower emissions: While water credits are separate from carbon credits, there can be interconnected benefits. For example, more efficient irrigation systems can use less water and energy. More reliable water supplies can also reduce the need for high-emitting fertilizers.
Why Individuals and Businesses Should Buy Water Credits
Water risk sometimes gets overshadowed by carbon emissions risk, but it’s important for both individuals and businesses to consider their water footprints. Buying water credits enables you to account for the impact of your water usage while supporting a broad range of environmental, economic, and social benefits.
In particular, consider the following:
For Individuals
You likely use far more water than you assume, particularly when accounting for indirect usage, like the water that went into making the jeans you bought. One survey from American Water found that most Americans think they use less than 100 gallons of water per day, when really total usage adds up to over 2,000 gallons daily, based on data from Water Footprint Network.
While it’s important to be mindful of your water usage, we’re all inevitably going to use water throughout our daily lives. So, purchasing water credits helps you take responsibility for the impact of this water usage while funding projects that have a wide range of co-benefits you may value.
For Businesses
Just as many companies acknowledge climate risk and commit to addressing greenhouse gas emissions, water scarcity and overuse can have direct economic effects on businesses, along with creating risks like reputational damage. By 2050, 31% of global GDP is projected to be exposed to high water stress, according to the World Resources Institute.
So, buying water credits can address your company’s direct water footprint and contribute to solving water scarcity and quality issues that can harm your operations going forward. Meanwhile, businesses can potentially increase goodwill with customers, employees, and the local communities where they operate by supporting water credit projects that have meaningful co-benefits.
Buying water credits can also align with other standards and certifications that many businesses value. Some examples include:
- WRI’s Volumetric Water Benefit (VWB) Accounting 2.0: Water credit projects can potentially align with this VWB accounting standard, and Bonneville Environmental Foundation was one of WRI’s partners involved in creating it. Still, consider looking into the details of this accounting standard and project specifics to determine alignment.
- UN Sustainable Development Goals (SDGs): Depending on the specific project, there can be benefits that align with multiple SDGs. For example, a project might align with SDG 6: Clean Water and Sanitation, while also supporting local economic development that aligns with SDG 11: Sustainable Cities and Communities.
- LEED Certification: Water credits can be matched to a building’s annual water usage and counted toward this green building certification.
- 1% for the Planet: BEF is an environmental partner of 1% for the Planet, so buying BEF WRCs® can qualify a company for membership.
- B Corp: Buying water credits can also count toward earning B Corp certification.
Ready to Support Water Restoration?
Terrapass makes it easy for you to balance your water footprint while supporting sustainable ecosystems and community development.
You can directly purchase BEF WRCs® through Terrapass today or reach out to speak with one of our sustainability experts who can help you build a custom portfolio of carbon credits and water credits that align with your sustainability goals.
Talk to a Sustainability Expert
The post The 2026 Complete Guide to Water Credits (WRCs) appeared first on Terrapass.
What auditors actually test, where projects actually fail, and the contract clauses that protect you before signature.
The meeting happens about fourteen months after the contract was signed. Your assurance provider has reached the nature-based investment line in your Scope 3 file, and the partner across the table has exactly two questions. How do you know the reductions happened? And how do you know they would not have happened anyway?
The first question is MRV: measurement, reporting, and verification. The second is additionality. Between them, they decide whether your nature-based investment counts, in your inventory, in your disclosure, and in front of your board. Everything else in the project documentation is supporting material for these two answers.
This article walks through what each question actually tests, where projects most commonly fail, what digital MRV has changed (and what it has not), and the contract clauses that protect you. The goal is to give you the diligence framework before you sign, because after the credit issues is the wrong time to discover the answers were weak.
What MRV actually verifies
MRV is the machinery that turns a field intervention into a defensible number. Measurement covers the data: biomass surveys, soil sampling, remote sensing, activity records from participating farms. Reporting covers the translation of that data into claimed reductions under a recognised methodology. Verification covers the independent check: an accredited third party tests the reporting against the methodology and the evidence.
The methodologies live in registries. Verra’s Verified Carbon Standard and the Gold Standard are the two largest for nature-based projects, and each publishes the methodology documents, monitoring requirements, and verification protocols that a project must follow. The ICVCM Assessment Framework now sits above the registries, assessing whole methodologies against the Core Carbon Principles and granting the CCP label to those that pass.
For a buyer, the practical questions are concrete. What is the monitoring frequency, and is it specified in the project design document or left vague? Who is the verifier, how were they selected, and how often do they rotate? What raw data do you, the buyer, get access to, and in what format? A project that answers these in writing is a different procurement than one that answers them in a sales call.
What additionality actually proves
Additionality asks whether the intervention caused the reduction, or whether the reduction would have happened anyway. The test is a counterfactual: what would this landscape, this farm, this forest have done without the project’s money?
Three forms matter in practice. Financial additionality asks whether the project needed the carbon revenue to proceed. Regulatory additionality asks whether the activity was already required by law. Common-practice additionality asks whether the activity is already standard in the region, in which case paying for it buys you nothing the world was not getting for free.
The reason additionality dominates audit conversations is recent history. Research published in 2023, including the Science paper examined at length in our piece on conventional offsets and boardroom credibility, found that a large share of REDD+ credits failed the counterfactual test because baselines were inflated. The market response was a wave of methodology revisions at Verra and the arrival of independent ratings agencies whose entire business is re-testing additionality claims. The Carbon Credit Quality Initiative publishes transparent scoring of methodologies on exactly this dimension, and it is free to consult before you sign anything.
Where projects most commonly fail the test
Five failure modes account for most of the wreckage.
- Inflated baselines. The counterfactual assumes more deforestation, more degradation, or lower yields than the evidence supports. The claimed reduction is the gap between reality and the baseline, so an inflated baseline manufactures reductions from nothing.
- Unaccounted leakage. The project protects one forest and the logging moves to the next valley. The methodology is supposed to net this out; weak projects estimate it optimistically.
- Thin permanence protection. Nature-based carbon can reverse: fire, pest, drought, or a change of landowner. Buffer pools and insurance mechanisms exist for this, but their adequacy varies enormously between projects.
- Attribution and double counting. In supply chain settings, the same reduction can be claimed by the supplier, the buyer, and a credit purchaser unless contracts prevent it. Our Insetting vs Offsetting piece covers the inventory rules; the point here is that the auditor will ask who else is counting this tonne.
- Stale monitoring. Data collected at validation and never refreshed. The IPCC AR6 Working Group III land-sector chapter documents how quickly carbon stocks respond to disturbance; a three-year-old measurement is a historical artifact, not a current claim.
What digital MRV changes, and what it does not
Digital MRV is the genuine improvement in the field. Satellite remote sensing, including the free archives at NASA Earthdata, allows biomass and land-cover change to be monitored continuously rather than at multi-year verification intervals. Soil carbon models calibrated with physical sampling reduce the cost of agricultural measurement. The practical effect is more frequent data at lower cost, which compresses the window in which a problem can hide.
What digital MRV does not change is judgment. Baselines are still human decisions about counterfactuals. Additionality is still an argument, not a measurement. Research groups such as the Oxford Smith School have been clear on this point: better sensors improve the M in MRV, but the integrity questions live in the assumptions, and assumptions need governance, not gadgets.
For a buyer, the test is simple. Ask the provider what is measured by instrument, what is estimated by model, and what is assumed by methodology. A provider who can answer that question crisply understands their own evidence chain. A provider who cannot is selling you their confidence rather than their data.
What to require in your contract
The diligence above converts into five contract clauses.
- Monitoring cadence and buyer data access, specified by dataset and frequency.
- Verifier independence, named accreditation, and rotation terms.
- Baseline revision triggers, so the counterfactual updates when the methodology or the evidence changes.
- Reversal liability and buffer adequacy, with the mechanism named and sized.
- Documentation handover in audit-ready form, so the evidence file your assurance provider needs already exists.
None of these clauses is exotic. All of them are absent from weak contracts, and their absence is the most reliable early signal that the MRV and additionality answers will be weak too.
If you are evaluating a nature-based investment and want the MRV and additionality stress-tested before signature rather than after, the carbon and sustainability experts at Carbon Credit Capital can run that review against any project on your shortlist, and design nature-based supply chain investments where the evidence chain is built audit-first. Schedule a consultation.
Sources and further reading
- ICVCM: Core Carbon Principles Assessment Framework
- Verra: Verified Carbon Standard
- Gold Standard for the Global Goals
- Carbon Credit Quality Initiative: Methodology quality scores
- University of Oxford Smith School: Sustainable finance research
- IPCC AR6 Working Group III, Chapter 7: AFOLU
- NASA Earthdata satellite remote sensing archive
EU Directive: Empowering Consumers for the Green Transition (ECGT)
The EU Directive, Empowering Consumers for the Green Transition (ECGT), takes effect on September 27, 2026.(1) The goal of ECGT is to protect consumers by ensuring that environmental claims are fair, understandable, and reliable. This regulation does create a new compliance requirement for businesses, but it also provides sustainability and marketing teams with important guidance that helps create consistency in sustainability communications.
Key takeaways
- ECGT takes effect September 27, 2026, and prohibits claims that a product or service has a neutral, reduced, or positive environmental impact based on offsetting alone.
- Named example phrases the regulation prohibits include climate neutral, CO2 neutral certified, carbon positive, climate net zero, climate compensated, reduced climate impact, and limited CO2 footprint.
- ECGT does not want to deter investment in carbon credits. It wants companies to communicate the real benefits of the projects they support instead.
- SBTi’s guidance recommends framing carbon credits as taking responsibility for ongoing emissions, not as making a product or company neutral.
- Voluntary carbon projects deliver real climate progress: reducing super-pollutants, protecting and restoring ecosystems, and supporting communities.
Regarding carbon credits specifically, voluntary carbon projects deliver important climate progress and environmental benefits that provide many talking points for companies. They reduce climate super-pollutants by removing industrial emissions like methane, N2O, HFCs and others. They protect and restore valuable ecosystems and carbon sinks like forests, mangroves and grasslands. They help communities by reducing local pollution, creating employment opportunities, improving access to healthcare, and more.
The Science Based Targets Initiative (SBTi), a global leader in business climate action, concludes that alongside aggressive decarbonization, we should also use high quality carbon credits to take responsibility for our ongoing emissions. SBTi recognizes that carbon credits are important “to help limit temperature overshoot, mitigate transition risks, and support climate solutions.”(2)
ECGT language on carbon offsetting says that they do not want to deter investment in carbon credits. They just want companies to focus on communicating the benefits of the projects they support and avoid claims beyond the scope of carbon credits, which is good for everyone, companies and consumers alike.
The regulation reinforces that carbon credits do not change the sustainability of your products, so carbon credit buyers should not suggest that their products are more sustainable because of carbon credits. Instead, companies need to promote their climate contributions as a way to compensate or take responsibility for their carbon emissions by supporting projects that do great things like reducing global carbon emissions, reducing pollution, preventing deforestation, restoring forests, and more.
ECGT language related to carbon offsetting
The regulation is particularly focused on prohibiting claims, based on offsetting greenhouse gas emissions, that a product or service has a neutral, reduced, or positive impact on the environment in terms of greenhouse gas emissions. These claims are prohibited in all circumstances because they mislead consumers into believing the claim relates to the product itself, or to how it was made and supplied, or into thinking that using the product carries no environmental impact at all.
Named examples of prohibited claims include:
- climate neutral
- CO2 neutral certified
- carbon positive
- climate net zero
- climate compensated
- reduced climate impact
- limited CO2 footprint
These claims are only allowed when they rest on a product’s actual lifecycle impact, not on offsetting emissions outside that product’s value chain, since the two are not equivalent. This prohibition does not stop companies from advertising their investments in environmental initiatives, including carbon credit projects, as long as they present that information in a way that is not misleading and that meets the other requirements of Union law.(1)
SBTi also provides guidance on climate contribution language in its Corporate Net Zero Standard Version 2.0 Draft for Second Public Consultation, November 2025. While the SBTi language is fairly technical, it has a good framework for crafting a climate contribution message.
SBTi Language for Carbon Credits(3)
- Take responsibility for ongoing emissions by delivering mitigation impact contributions
- Carbon credits certify the mitigation outcomes of projects that reduce, avoid, or remove carbon emissions
- Activities that reduce emissions from emission sources not located within the company’s value chain
- Activities that conserve, protect, and enhance natural carbon sinks
- Activities that capture and store carbon in storage pools
SBTi’s draft standard also walks through sample claim language for this kind of contribution. In general, the samples move from a simple percentage statement, to naming a specific verified tonnage tied to that percentage, to a fuller statement that breaks the tonnage into reductions versus removals. Across all three, the framing stays consistent: a company took responsibility for a defined share of its ongoing emissions over a set period, by funding a specific, verified amount of mitigation, achieved through emission reductions or removals.(3)
FAQ: ECGT and Carbon Credit Claims
When does the ECGT directive take effect?
The rules apply across the EU from September 27, 2026, after member states transposed the directive into national law by March 27, 2026.
Does ECGT ban carbon offsetting?
No. It bans specific marketing claims that a product or service is environmentally neutral, reduced impact, or positive based on offsetting. Advertising investment in carbon credit projects themselves is still allowed if it is not misleading.
What phrases does ECGT specifically prohibit?
Named examples include climate neutral, CO2 neutral certified, carbon positive, climate net zero, climate compensated, reduced climate impact, and limited CO2 footprint, when those claims are based on offsetting rather than a product’s actual lifecycle impact.
How should a company describe its carbon credit purchases instead?
SBTi’s guidance recommends stating the specific verified tonnage of emissions reductions or removals funded and describing that as taking responsibility for a defined share of ongoing emissions, rather than claiming the company or product is neutral.
Does this rule apply to company level sustainability claims too?
ECGT is focused on claims about specific products and services in consumer marketing. Broader company level sustainability communication is a separate matter still governed by other existing rules.
While ECGT does add a new compliance burden for businesses, it helps create consistency in sustainability messaging that is important to building confidence in voluntary carbon projects and scaling the industry to help us achieve progress on global carbon emissions.
Disclaimer: Terrapass does not provide legal or regulatory advice. Any interpretation of regulation must be approved by your legal representative.
References:
(1) https://eur-lex.europa.eu/eli/dir/2024/825/oj
(2) https://files.sciencebasedtargets.org/production/files/Corporate-Net-Zero-Standard-version-2.pdf
(3) https://files.sciencebasedtargets.org/production/files/CNZS-V2-Second-Consultation-Draft.pdf
The post The EU’s New Green Claims Rules and Carbon Credits appeared first on Terrapass.
Most businesses that decide to act on their net-zero targets reach the same point of friction. Buying carbon credits has meant tracking down brokers, sitting through sales calls, and requesting a quote just to learn a price, sometimes with limited proof of what you are buying.
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