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Decarbonization Pathways

Carbon Offsets & Credits: Trading for a Better Climate

Understanding how carbon markets work and how they can accelerate climate action

What are Carbon Offsets and Credits?

Carbon offsets and credits are the financial instruments of climate action. When a company or individual cannot reduce their emissions enough to meet their climate goals, they can purchase carbon credits that represent verified emissions reductions from elsewhere. This creates a market that incentivizes investment in clean technologies and conservation projects.

The global carbon market is growing rapidly, with voluntary markets reaching billions of dollars annually and compliance markets (like the EU Emissions Trading System) representing hundreds of billions more. Understanding how these markets work is essential for anyone serious about climate action.

The Power of Markets

Efficiency: Markets find the lowest-cost emissions reductions • Scale: Connects global buyers with local projects • Innovation: Rewards breakthrough technologies • Transparency: Public registries track all transactions

Interactive Carbon Market Navigator

Explore the different types of carbon markets and understand how credits flow from projects to buyers. Click on market types and flow steps to learn more.

How Carbon Markets Work

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CompanyOffset Project

Company buys carbon credits to offset emissions

$50/credit

Project DeveloperVerification Body

Projects generate and verify carbon credits

1,000 tCO₂
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SellerBuyer

Credits traded on exchanges or OTC

Market price
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Credit HolderRegistry

Credits retired to claim emission reductions

Permanent
Click any step to learn more👆

Carbon Market Principles

Additionality: Credits must represent emissions reductions beyond business-as-usual
Permanence: Carbon reductions must be maintained over the long term
Double Counting: Same reduction cannot be claimed by multiple parties