We’re running the most dangerous experiment in history right now, which is to see how much carbon dioxide the atmosphere… can handle before there is an environmental catastrophe.
Last month we launched our Carbon Credit AI, and invited you to submit your questions. Now that this service has been running for a few weeks, it’s becoming increasingly evident that one of the questions you’re most curious about is who issues carbon credits and how, so we decided to write this blog post and give some insights. Hopefully you’ll find this insightful…
What is a Carbon Credit?
Climate change is one of the greatest challenges facing our planet today. The burning of fossil fuels and other human activities have led to an increase in greenhouse gas emissions, which in turn has caused global temperatures to rise. This has resulted in more frequent and severe weather events, rising sea levels, and other detrimental effects on the environment.
Carbon credits represent a unit of measurement for greenhouse gas emissions reductions or removals. Carbon credits enable entities to offset their own emissions by investing in ventures that reduce or remove greenhouse gasses from the atmosphere. This not only helps to reduce overall emissions but also promotes sustainable development and the transition to a low-carbon economy.
Carbon credits support climate change mitigation by providing a financial framework of incentives that governs how companies and organizations match their climate change commitments and reduce their emissions.
When a company or organization reduces its emissions below a certain threshold, it can earn carbon credits. These credits can then be sold or traded on carbon markets.
Understanding the Carbon Market
The carbon market is a system that enables the buying and selling of carbon credits. It operates on the principle of supply and demand, with some companies and organizations seeking to buy carbon credits to offset their emissions, while others seek to sell their excess credits. The carbon market can be divided into two main types:
- Compliance markets
- Voluntary markets.
Trading mechanisms in these carbon markets vary depending on the type of market and the specific rules and regulations in place:
Carbon Credit Compliance Markets
Compliance markets are established by governments and are mandatory for certain industries or sectors. These markets use carbon credits as a means of compliance to ensure that companies meet mandatory targets. Carbon credits in these markets are typically allocated or auctioned off by governments, and companies can buy or sell these credits on a secondary market.
Examples of compliance markets are:
- The European Union Emissions Trading System (EU ETS)
- The California Cap-and-Trade Program.
Carbon Credit Voluntary Markets
Voluntary markets are not regulated by governments and are driven by companies and individuals who voluntarily choose to offset their emissions. Carbon credits for these markets are often generated through projects that reduce or remove greenhouse gasses, and these credits can be bought directly from project developers or through specialized platforms. These markets provide an opportunity for companies to take responsibility for their carbon footprint and demonstrate their commitment to sustainability.
Examples of voluntary markets are:
- The Verified Carbon Standard (VCS).
- The Gold Standard.
How are Carbon Credits Issued?
Carbon credits can be issued for projects that can be proven to reduce carbon emissions or absorb carbon from the environment. These may include, but are not limited to:
- Renewable energy initiatives.
- Energy efficiency programs.
- Afforestation & reforestation projects.
- Waste management schemes.
These projects not only help to reduce emissions but also contribute to sustainable development and job creation. By issuing carbon credits for these projects, governments, international organizations and private enterprises can support their implementation and ensure they are financially viable. Let’s take a closer look at how each of the above projects are leveraged to create carbon credits:
Issuing Carbon Credits from Wind Farms
By generating clean, renewable energy, wind farms help to reduce the demand for fossil fuels and the associated greenhouse gas emissions. The emission reductions achieved by the wind farm can be quantified and converted into carbon credits, which can then be sold on the carbon market. Carbon Credit Capital offers such credits from our renewable energy partners in India.
Issuing Carbon Credits from Afforestation
These projects help to absorb carbon dioxide from the atmosphere and store it in biomass by planting trees. The amount of carbon dioxide absorbed by the trees can be quantified and converted into carbon credits. These credits can then be sold to companies or individuals looking to offset their emissions.
Carbon Credit Capital offers such credits from our forest conservation in Mongolia.
Issuing Carbon Credits from Waste Management
Waste management schemes create carbon credits by implementing methods to reduce carbon dioxide and methane emissions associated with waste, typically through activities such as food rescue, plastic recycling, and landfill gas management. Public and private waste management organizations can generate carbon credits that can be traded in carbon markets. This not only helps in environmental conservation but also provides economic benefits through the sale of these credits.
Carbon Offset Projects’ Auxiliary and Ancillary Benefits
Carbon offset projects provide multiple benefits beyond emission reductions. They often contribute to sustainable development, create jobs, and support local communities. For example, a renewable energy project can provide clean electricity to remote areas that previously relied on fossil fuels. A reforestation project can create employment opportunities for local communities and protect biodiversity.
By issuing carbon credits for these projects, the carbon market provides a financial incentive for their implementation. This helps to attract investment and support the growth of sustainable practices. Carbon offset projects also contribute to the transition to a low-carbon economy by promoting renewable energy, sustainable agriculture, and other climate-friendly activities.
How are Carbon Credits Certified?
The certification process is an essential step in issuing carbon credits and ensuring their credibility and integrity. Certification bodies are responsible for verifying that emission reduction projects meet specific criteria and standards before issuing carbon credits. This process involves a thorough assessment of the project’s methodology, monitoring systems, and emission reduction calculations.
The certification process begins with project developers submitting a project design document (PDD) to the certification body. The PDD outlines the project’s objectives, methodologies, and expected emission reductions. The certification body reviews the PDD and conducts an initial assessment to determine if the project meets the necessary requirements.
If the project is deemed eligible, it moves on to the validation stage. During validation, the certification body conducts an on-site visit to verify that the project is being implemented according to the approved methodology. This includes reviewing monitoring systems, data collection methods, and emission reduction calculations.
Once validation is complete, the certification body issues a validation report and registers the project with a unique identification number. The project can then begin generating carbon credits based on its verified emission reductions. These credits are typically issued in the form of tradable certificates, which can be bought and sold on the carbon market.
Examples of certification bodies include the aforementioned VCS and Gold Standard, as well as the Climate Action Reserve. These organizations have established rigorous standards and guidelines for carbon credit projects and provide independent verification and certification services. By certifying carbon credits, they ensure projects meet the necessary criteria and contribute to real emission reductions.
Carbon Credits Verification
Verification is another crucial step in issuing carbon credits and ensuring their credibility and integrity. Verification bodies such as Det Norske Veritas (DNV), SGS, and TÜV SÜD, have extensive experience in verifying emission reduction projects and ensuring compliance with international standards. By providing independent verification services, they help to build trust in the carbon market and ensure the integrity of carbon credits.
Carbon Credits Verification process
- Verification begins with project developers submitting a verification report including detailed information on the project’s emission reduction calculations, monitoring systems, and data collection methods to the verification body.
- The verification body then reviews the report and conducts an independent assessment to determine if the project meets the necessary requirements.
- Verification bodies may request additional information or conduct on-site visits to verify a project’s data’s accuracy. This includes reviewing monitoring equipment, data collection procedures, and emission reduction calculations. The verification body also checks for any potential errors or inconsistencies in the project’s documentation.
- Once the assessment is complete, the verification body issues a verification statement that confirms the accuracy of the project’s emission reduction calculations. This statement is then used by the certification body to issue carbon credits for the project. The verification body may also provide recommendations for improving monitoring systems or data collection methods to ensure ongoing compliance with standards.
Carbon Credits – Government’s Role
Governments play a crucial role in issuing carbon credits and driving emission reductions. They establish policies and regulations that set emission reduction targets for industries and sectors, and they oversee the allocation and trading of carbon credits. Government agencies are responsible for issuing and monitoring carbon credits, ensuring that they are valid and meet the necessary criteria.
Government policies on carbon credits vary from country to country, but they generally aim to incentivize emission reductions and promote sustainable practices. These policies can include cap-and-trade systems, carbon taxes, renewable energy incentives, and other measures that encourage companies to reduce their emissions. By issuing carbon credits, governments provide a tangible incentive for companies to invest in emission reduction projects.
Government agencies responsible for issuing carbon credits also vary depending on the country. In some cases, it may be a dedicated agency or department within the government that is responsible for overseeing the carbon market. In other cases, it may be a regulatory body or an environmental agency that is tasked with monitoring emissions and issuing carbon credits.
Carbon Credits – International Organizations’ Role
International organizations play a significant role in issuing carbon credits and reducing emissions on a global scale. These organizations work to establish standards and guidelines for carbon credit projects, provide technical assistance to project developers, and facilitate the trading of carbon credits.
One example of an international organization involved in carbon credits is the United Nations Framework Convention on Climate Change (UNFCCC), which oversees the Clean Development Mechanism (CDM), which allows developing countries to earn carbon credits by implementing emission reduction projects. The CDM has been instrumental in promoting sustainable development and technology transfer in developing countries.
Another example is the International Civil Aviation Organization’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which aims to offset the growth in international aviation emissions by requiring airlines to purchase carbon credits from approved projects. This initiative is expected to play a significant role in reducing emissions from the aviation sector.
Another important activity by international organizations is the funding and support for carbon credit projects. For example, the World Bank’s Forest Carbon Partnership Facility (FCPF) provides financial incentives for countries to reduce emissions from deforestation and forest degradation. By issuing carbon credits for these projects, international organizations can help to mobilize private sector investment and promote sustainable development.
Carbon Credits – Private Enterprises’ Role
As mentioned earlier, private entities and companies are key players in the carbon market, both as buyers and sellers of carbon credits.
Private Enterprise Carbon Credit Buyers
Many companies choose to meet compliance requirements, sustainability goals, or corporate social responsibility commitments by electing to offset their emissions through the purchase of carbon credits from projects that reduce or remove greenhouse gasses.
Private Enterprise Carbon Credit Sellers
There are also private companies that specialize in issuing carbon credits. The financial model on which these companies operate involves the development and implementation of emission reduction projects similar to the ones listed above through which they earn carbon credits for the attributable emissions reductions. These credits are then sold at a profit on carbon markets.
Examples of private companies issuing carbon credits may include:
- Renewable energy developers.
- Waste management companies.
- Forestry organizations.
Not only do these companies prove the financial incentive for others to make similar investments, and contribute to the transition to a low-carbon economy, but they also play a crucial role in promoting sustainable practices and educating for emission reductions.
Private Enterprises’ Role in Education
An important aspect of private companies’ involvement with carbon credits is the promotion of carbon credit projects through marketing and communication efforts – Often companies choose to highlight their carbon offset initiatives for branding purposes, as part of their sustainability strategies, or their corporate social responsibility efforts. These activities help raise awareness and encourage others to follow suit. By showcasing the benefits of carbon credits, private companies can inspire others to join the fight against climate change.
Conclusion
Carbon credits are a crucial tool in mitigating climate change and promoting sustainable development. They provide a financial incentive for companies and organizations to reduce their emissions and invest in emission reduction projects. Governments, international organizations, and private companies all play a role in the issuance, certification and validation of carbon credits and thereby driving emission reductions. Certification and verification processes ensure the credibility and integrity of carbon credits, while transparency promotes trust in the carbon market. The future of carbon credits holds great potential for achieving global climate goals and transitioning to a low-carbon economy.
If you’re interested in learning more about carbon credits and their impact on the environment, feel free to reach out to us – We’re always happy to help!
Nature-based carbon investments deserve consideration when they address a specific business dependency and produce outcomes you can measure. Imagine Moonbucks, a global coffee roaster planning next season’s espresso blend. It is considering natural Grade 4 coffee from Jimma, in southwestern Oromia, Ethiopia. Its sourcing decisions affect the roasting schedule and the cash tied up in coffee purchases. Moonbucks needs to understand which measures could protect that supply, what they would cost and how it would judge the results.
1. Define the sourcing problem before choosing a project
Moonbucks needs a dependable component for its espresso blend. Its procurement team wants continuity of volume and an agreed cup profile. Replacing a shipment at short notice could require new sample approval and changes to the blend, and given the schedules for cultivation, processing, and freight delivery, is practically impossible. Moonbucks needs to get this right, and its initial concern is inconsistent deliveries. It commissions an assessment of the supplying farms and post-harvest chain. The questions cover land condition, harvest availability and whether drying or storage problems are affecting saleable lots.
This distinction changes the investment brief. A tree-planting proposal cannot be assumed to fix drying problems. Better storage cannot restore eroded land. The team must establish which problem exists before selecting the response.
CCC’s guide to finding nature-based solutions in your supply chain explains where to look. Here, the next task is to turn a broad concern into a testable proposal.
2. Develop nature-based carbon investments around the actual supply chain
The assessment would trace Moonbucks’ purchases back through the exporter and supplying producer groups. Which farms supply the contracted lots? Who controls land-management decisions? How long does the buyer expect to maintain the purchasing relationship?
Furthermore, Jimma natural Grade 4 cannot be treated as interchangeable with every Ethiopian coffee. Moonbucks would need to test any substitute against its own blend and quality requirements.
Suppose Moonbucks’ assessment identifies an opportunity to maintain shade trees and restore vegetation along exposed streambanks. The IPCC describes agroforestry as a way to store carbon in vegetation and soil, with potential benefits for erosion control and water quality.1 Moonbucks would need local advice on species, growing conditions and maintenance before deciding how these measures fit its sourcing plan.
The proposal now has a defined sourcing connection and a candidate intervention. The next steps are to test its effect on production, assess carbon eligibility and build the financial case.
3. Compare the proposal with other ways to protect supply
WBCSD’s Nature-based Solutions Blueprint recommends comparing nature-based options with other responses across their benefits and costs.2 For Moonbucks, that means evaluating the landscape proposal alongside drying improvements, storage controls and alternative sourcing arrangements.
The product’s natural-process designation matters. Moonbucks should examine the drying and dry-milling chain alongside land conditions. Its team would check storage practices, contamination risks and incoming-lot quality to see whether problems arise before or after the coffee leaves the farms.
The revised proposal might combine land stewardship with separate post-harvest controls. Each component needs its own purpose and budget. A sustainability label should not obscure which activity is expected to solve which problem.
The project develops as the evidence improves. Its scope should follow the diagnosis rather than preserve the first idea unchanged.
4. Establish what the carbon outcome could count toward
Moonbucks’ sustainability team now tests the proposed carbon case separately from the sourcing case. Is the objective a measurable change in Moonbucks’ value-chain emissions, verified credits for separate voluntary use, or distinct outcomes under carefully defined arrangements?
Scope 3 covers value-chain emissions. A purchasing relationship alone does not prove that a farm intervention can be included in Moonbucks’ inventory. The team needs an applicable accounting method, defensible boundaries and evidence supporting attribution.
SBTi’s FLAG Guidance (forest, land and agriculture), version 1.2, says purchased credits used as offsets cannot meet near-term FLAG or energy and industry targets. Eligible land-based removals are subject to accounting requirements.3 Moonbucks needs to test its proposal against those rules before including an outcome in its targets.
For Moonbucks’ Jimma proposal, maintaining existing trees and establishing new vegetation could involve different carbon questions. Specialists must examine the baseline and additionality, meaning what changes because the project proceeds. They must also assess measurement and the risk that stored carbon is lost. CCC’s MRV and additionality article introduces those tests.
Until that work is complete, Moonbucks should not budget an assumed Scope 3 reduction or credit-sale receipt. Direct emissions reductions remain the priority.
5. Build a financial case that survives weaker assumptions
Moonbucks’ finance team would now build a multi-year budget. UNEP’s State of Finance for Nature 2023 compares current finance with the investment needed to meet climate, biodiversity and land-restoration goals.4 The company would cost its proposed activities, farmer participation and ongoing monitoring. Verification, where required, is a separate expense. Maintenance and responsibility for replacing failed plantings must remain visible after the initial establishment budget ends.
Operational benefits need equally careful treatment. If fewer rejected lots reduce emergency purchasing, count that saving once. Do not add “supply resilience” as another financial benefit when it represents the same avoided cost.
Moonbucks should compare a base case with slower benefits, higher implementation costs and no carbon revenue. It should also distinguish production outcomes from quality and shipment outcomes. A single good harvest would not prove that the landscape intervention caused better delivery performance.
A project can remain worth funding even when its carbon case needs more work. That decision must rest on the operational evidence and the company’s objectives, without unsupported environmental claims.
6. Fund a pilot with a clear expansion decision
Moonbucks’ first approval would fund a bounded pilot, rather than commit the entire sourcing program. Before spending, Moonbucks would agree on participating farms, responsibilities and the evidence needed at review.
Its scorecard could track farmer participation, implementation costs and plant survival, alongside accepted coffee volumes and lot-quality results. Carbon measurements would follow the selected method. Farm-level traceability must connect the intervention to the actual sourcing relationship.
Suppose Moonbucks’ review later finds that storage changes explain most quality improvements, while the land measures need longer observation. Those findings would shape the next decision: expand the proven component, adjust the landscape work or pause further spending. They would not justify crediting all improvements to tree planting.
This gives nature-based carbon investments a practical place in a multi-year strategy. Funding increases as the evidence supports it, and the project can change direction before a larger commitment.
Discuss a sourcing opportunity with CCC
Carbon Credit Capital’s nature-based supply-chain investment service uses its Dual-Value Model to examine supply-chain economics alongside potential sustainability outcomes.
Schedule a consultation to discuss your sourcing exposure and the questions to resolve before allocating capital.
Sources
- Intergovernmental Panel on Climate Change (IPCC), Climate Change 2022: Mitigation of Climate Change, Chapter 7, Agriculture, Forestry and Other Land Uses, section 7.4.3.3 (Agroforestry).
- World Business Council for Sustainable Development (WBCSD), Nature-based Solutions Blueprint, 5 June 2024.
- Science Based Targets initiative (SBTi), Forest, Land and Agriculture Science-Based Target-Setting Guidance, version 1.2, March 2026, section 3.1.4, pp. 37–38.
- United Nations Environment Programme (UNEP), State of Finance for Nature 2023, 2023.
A plastic credit funds the collection of plastic waste in places where no formal system exists to collect it. Each credit represents a measured, independently audited quantity of plastic taken out of the environment or returned to use, tracked on a public registry.
EU carbon credit claims changed on 27 September 2026, the day the Directive (EU) 2024/825 began to apply across the European Union. The change is narrow. It changes how a company can talk about the credits it buys. A product can no longer be called neutral on the strength of compensation alone; however, every specific, evidenced statement about what a company measured, reduced, and funded stays fully available.
