Carbon Credits Glossary


Additionality refers to carbon offset benefits that would not have happened on their own accord, i.e. without the effect of carbon financing. A project that “saves” a forest that was not credibly under threat is a project that does not demonstrate additionality.

Carbon Credit

A carbon credit is a unit of measure generated from a specific project activity that destroys, sequesters or avoids greenhouse gas (GHG) emissions. One credit is equivalent to 1 Mt (metric tonne) of greenhouse gas emissions. A carbon credit and a carbon offset are effectively equivalent, i.e. different terms for the same thing.


A euphemism to describe the amount of carbon dioxide (CO2) and all GHG, or greenhouse gas emissions, in the atmosphere. Often used as an umbrella term that includes not just carbon dioxide (CO2), but other greenhouse gasses such as methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3).

Cap and Trade

Governments or companies are given emission targets (caps) and can purchase tradable emissions allowances to compensate for going over a cap. One cap is generally valued as one metric ton of CO2 emissions.

Carbon Footprint

The total amount of greenhouse gases that are emitted into the atmosphere each year by a person, family, building, organization or company.

Carbon Market

A carbon market refers to the buying and selling of GHG, or greenhouse gas emissions, worldwide. The overall carbon market consists of two submarkets: 1) a compliance market guided by government regulation and multinational agreements, and 2) a voluntary carbon market (VCM) typically utilized by businesses and individuals seeking to offset their carbon impact.

Carbon Permit

A permit gives its holder the right to pollute up to a certain level.

Clean Development Mechanism (CDM)

The system established under the Kyoto Protocol through which countries meet emissions targets by purchasing carbon credits that fund sustainable development projects.


The economic, social, and climate benefits found in a single policy or measure created to address climate change.

Commodity Broker

An entity that buys and sells carbon credits that are not yet retired. They collect a margin on the sale of this service.

Compliance Market

The compliance market refers to the regulatory framework established by governments and multinational agreements to legally limit how many metric tons of greenhouse gasses businesses within their jurisdiction can emit. Within a compliance market, businesses that emit less than their allowance can often sell their unused allocation to businesses that emit more than their allowance, in what is often referred to as a “cap and trade” scheme. The compliance market is sometimes also referred to as the “regulatory market.”

Emissions Obligation

Total amount of annual CO2 emissions from a company that are regulated under the California cap-and-trade system.

Gold Standard

A certification standard for offset projects in countries that don’t have emission reduction targets under the Kyoto Protocol.

Greenhouse Gas (GHG)

Stands for greenhouse gas. These gases include CO2 (carbon dioxide), CH4 (methane), N2O (nitrous oxide), HFCs (hydrofluorocarbons), PFCs (perfluorocarbons), and SF6 (sulfur hexafluoride). Some programs also include NF3 (nitrogen trifluoride).

Greenhouse Gas Effect

Is caused when GHG, or greenhouse gases, get trapped by the Earth’s atmosphere and retain heat.

Guarantees of Origin (GO)

The European Union mandate that all member states must disclose to consumers the proportion of their electricity consumption that is generated from renewable energy.

Greenhouse Gas Registry

A public listing platform for recognizing businesses that have reported third-party verified GHG, or greenhouse gas, inventories, as well as reduced emissions.

Kyoto Protocol

The United Nations protocol ratified in 1997 that established carbon emission reduction targets for participating nations (notably excluding the United States).

Low Carbon Fuel Standard (LCFS)

Stands for Low Carbon Fuel Standard and is a measure that was enacted by former California Governor Schwarzenegger to develop alternative fuel markets as well as reduce the carbon intensity of transportation fuels by replacing 10% of gasoline or diesel with alternative fuels such as ethanol, biodiesel, renewable diesel, compressed natural gas, or biogas. LCFS credits are not the same as carbon credits.


Stands for Leadership in Energy and Environmental Design and is a globally-recognized rating system to measure the sustainability of all building types and all building phases. LEED is not related to GHG or the carbon market.


Carbon credits only count as an emissions reduction once purchased and cannot be reversed.

Project Design Document (PDD)

An essential technical document that outlines a carbon credit project’s strategy and methods.

Project Protocol

A document published by the Greenhouse Gas Registry. A carbon project developer will follow the methodology and meet all the criteria specified in the project protocol.


In this regard, this addresses the number of tonnes of GHG, or greenhouse gas.


The project exists and the credits represent measurable reductions in greenhouse gases.


Stands for Reduce Emissions from Deforestation and Forest Degradation and is an international framework to both stop the destruction of forests and to implement forest management programs. It fosters environmental conservation and restoration, economic stimulus, training, and entrepreneurship based on data that GHGs (greenhouse gases) increase as forest stock decreases. REDD+ projects provide positive social benefits such as making bricks of charcoal with branches and twigs, rather than cutting down trees.


Carbon Credits can be used only once and must be registered with a unique serial number.


Is a third-party program to verify, account for, measure, and collect data for GHG, or greenhouse gas, emissions to be traded on the carbon market.

Regulatory Offsets

Offsets purchased to fulfill a regulated emissions cap. 

Renewable Energy Certificate (REC)

RECs are issued when one megawatt-hour (MWh) of electricity is generated and delivered to the electricity grid from a renewable energy resource. These are used to document the origins of one MWh (megawatt) of renewable energy between the electricity generator (wind, solar, hydro, etc.), the electricity purchaser, and its stakeholders.


Is similar to a commodity broker, but on a smaller scale. A reseller sells to the end-user.

Renewable Natural Gas (RNG) Programs

RNG programs give gas customers a choice to purchase a percentage of their usage as renewable natural gas, which is produced from biomass, and is interchangeable with liquified petroleum gas.

Sustainable Development Goals (SDGs)

The Sustainable Development Goals are a list of 17 goals, as laid out by the United Nations, for a more sustainable future. Of the 17, four are climate-related, including climate action.


Stands for Tradable Instrument for Global Renewables and is an online platform from which to track and trade RECs in Asia, Africa, and the Americas.


At the beginning stages, validation is a process of having a qualified accredited third-party audit of a carbon project. This assures that the project meets the GHG, or greenhouse gas, program criteria.


A process of having a qualified, accredited third-party audit of a carbon project after it has generated carbon credits. This assures that the carbon credits are genuine and bonafide.

Verified Carbon Standard (VCS)

A standard for certifying carbon emission reductions that is managed by the nonprofit Verra. 

Volatile Organic Compound (VOC)

Organic and man-made chemicals that impact indoor air quality and may pose health risks. A VOC is not a GHG. VOC’s are often found in building materials, home and personal products, and activities such as smoking cigarettes or burning wood.

Voluntary Offsets

Offsets purchased for any other reason like a corporate sustainability program.

Water Restoration Certificate (WRC)

A certificate confirming the purchase of 1,000 gallons of water to offset water usage and restore critical rivers or streams, particularly at times when water is needed the most.