Carbon Market Glossary
Clear definitions of voluntary carbon market terms. Use this glossary to understand the terminology used across carbon registries, regulatory frameworks, and market intelligence platforms.
A
Additionality
A carbon project demonstrates additionality when it can prove that its greenhouse gas emission reductions would not have occurred without the revenue from carbon credit sales. Additionality is the most fundamental quality criterion in voluntary carbon markets and is assessed during project validation by third-party auditors.
Article 6 (Paris Agreement)
Article 6 of the Paris Agreement establishes rules for international carbon market cooperation. Article 6.2 governs bilateral trading of Internationally Transferred Mitigation Outcomes (ITMOs) between countries. Article 6.4 creates a centralized UN mechanism for generating credits. Both mechanisms require corresponding adjustments to avoid double counting.
Avoidance Credits
Carbon credits generated by preventing emissions that would have otherwise occurred. Examples include renewable energy replacing fossil fuel power plants, improved cookstove projects, and avoided deforestation (REDD+). Avoidance credits are distinct from removal credits, which physically remove CO₂ from the atmosphere.
B–C
Baseline
The projected level of greenhouse gas emissions that would occur in the absence of a carbon project. The baseline serves as the reference scenario against which actual emissions are compared to calculate the number of credits a project can generate.
Buffer Pool
A reserve of carbon credits set aside to cover potential reversals in nature-based projects. If a forest fire destroys trees in a REDD+ project, credits from the buffer pool are cancelled to maintain environmental integrity. Buffer pool contributions typically range from 10–40% of total issuance.
Carbon Credit
A tradeable certificate representing one metric tonne of carbon dioxide equivalent (tCO₂e) that has been reduced, avoided, or removed from the atmosphere. Carbon credits are issued by registries such as Verra, Gold Standard, ACR, CAR, Isometric, and Puro.earth after independent verification.
Carbon Offset
A carbon offset is a carbon credit that is retired (cancelled) to compensate for emissions elsewhere. When a company retires a carbon credit, it can no longer be traded or used again. The terms "carbon credit" and "carbon offset" are often used interchangeably, though technically an offset refers specifically to a retired credit.
Corresponding Adjustment
A bookkeeping mechanism under Article 6 of the Paris Agreement. When a country authorizes carbon credits for use by another country or entity, it must add those emissions back to its own national inventory. This prevents double counting — where both the host country and the credit buyer claim the same emission reduction.
CORSIA
The Carbon Offsetting and Reduction Scheme for International Aviation, managed by ICAO. CORSIA requires airlines to offset growth in international aviation CO₂ emissions above 2019 levels. Only carbon credits from approved programs and eligible vintages qualify for CORSIA compliance.
D–I
Double Counting
When the same emission reduction is claimed by more than one party. Double counting can occur between countries (without corresponding adjustments), between compliance and voluntary markets, or between a project developer and a credit buyer. Article 6 mechanisms are designed to prevent double counting.
ICVCM (Integrity Council for the Voluntary Carbon Market)
An independent governance body that sets quality standards for voluntary carbon credits. The ICVCM's Core Carbon Principles (CCPs) define a threshold of quality, and credits meeting CCP standards receive a CCP label indicating high integrity.
Issuance
The act of a registry creating and recording new carbon credits in its system after a project's emission reductions have been independently verified. Issuance volume and timing are tracked as key market indicators.
ITMO (Internationally Transferred Mitigation Outcome)
A unit of emission reduction transferred between countries under Article 6.2 of the Paris Agreement. ITMOs require corresponding adjustments by both the transferring and acquiring countries. ITMOs are distinct from voluntary carbon credits but the two markets increasingly interact.
L–P
Leakage
When a carbon project causes an increase in emissions outside its boundaries. For example, protecting one forest (REDD+) might push logging activity to an adjacent unprotected forest. Projects must account for leakage in their emission reduction calculations.
MRV (Monitoring, Reporting, and Verification)
The process by which carbon projects measure their emission reductions (monitoring), document results (reporting), and have those results independently confirmed (verification). MRV is the quality assurance backbone of carbon markets.
Permanence
The requirement that emission reductions or removals are long-lasting and not reversed. Forest carbon projects face permanence risk from fires, disease, or land-use changes. Engineered removal methods (like direct air capture) offer higher permanence certainty.
Project Design Document (PDD)
A detailed technical document that describes a carbon project's baseline, methodology, monitoring plan, and expected emission reductions. The PDD is submitted to a registry during project registration and is publicly available for review.
R
REDD+ (Reducing Emissions from Deforestation and Forest Degradation)
A framework for creating carbon credits from forest conservation in developing countries. REDD+ projects generate avoidance credits by protecting forests that would otherwise be deforested. REDD+ credits have faced controversy over baseline calculations and additionality.
Registry
An organization that operates the infrastructure for issuing, tracking, transferring, and retiring carbon credits. The six major voluntary carbon market registries are Verra (VCS), Gold Standard, American Carbon Registry (ACR), Climate Action Reserve (CAR), Isometric, and Puro.earth. Each registry maintains a public database of all credits in its system.
Removal Credits
Carbon credits generated by physically removing CO₂ from the atmosphere. Methods include direct air capture (DAC), biochar, enhanced rock weathering, and afforestation/reforestation. Removal credits are generally valued higher than avoidance credits because they represent actual atmospheric CO₂ reduction.
Retirement
The permanent cancellation of a carbon credit in a registry's system. Once retired, a credit cannot be transferred, sold, or used again. Companies retire credits to claim the associated emission reduction against their carbon footprint. Retirement data is publicly available on registry platforms.
S–V
SDGs (Sustainable Development Goals)
The United Nations' 17 global goals for sustainable development. Many carbon projects claim co-benefits aligned with specific SDGs, such as clean water (SDG 6), affordable energy (SDG 7), or climate action (SDG 13). Gold Standard requires projects to demonstrate SDG contributions.
Validation
The initial assessment of a carbon project's design by an independent third-party auditor (Validation/Verification Body or VVB). Validation confirms that the project's methodology, baseline, and monitoring plan meet registry standards before the project is registered.
Verification
The periodic assessment of a project's actual emission reductions by an independent auditor. Verification occurs after monitoring and before credit issuance. Projects must undergo verification at regular intervals (typically annually or biennially) to receive new credits.
Vintage
The year in which a carbon credit's emission reduction or removal actually occurred. For example, a credit with a 2023 vintage represents one tonne of CO₂ reduced or removed during 2023, regardless of when the credit was issued or retired. Newer vintages are generally preferred by buyers.
VCS (Verified Carbon Standard)
The world's largest voluntary carbon credit program, operated by Verra. VCS has registered over 2,000 projects and issued billions of carbon credits across project types including REDD+, renewable energy, methane capture, and improved cookstoves.
Voluntary Carbon Market (VCM)
The market for carbon credits purchased voluntarily by companies and individuals, as opposed to credits required under compliance regulations. The voluntary carbon market allows organizations to offset their emissions beyond regulatory requirements. VCM.fyi is named after this market.