A carbon credit is a certificate that can be bought and sold. It shows that one ton of carbon dioxide or an equal amount of other greenhouse gases (GHG) was prevented from entering the atmosphere or was removed from it. Carbon offsetting happens when a group or person uses carbon credits to balance out their own GHG emissions, following rules set by programs or goals.

Carbon credit trading systems allow project developers to create projects that reduce GHG emissions. These projects can earn carbon credits, which are then sold to buyers who use them to show they have reduced their own emissions. In some regulated markets, like the European Union Emission Trading Scheme or California’s Cap-n-Trade program, carbon credits help businesses meet legal requirements to lower emissions. These credits can also support global goals to reach net zero GHG emissions. Buyers decide how to use or "retire" the credits.

Projects that earn carbon credits involve actions that stop GHG emissions or increase their removal. These projects follow rules from crediting programs, including approved methods and requirements. For example, methods might include planting trees, restoring mangroves, or closing coal power plants early. If a project meets all program rules, it receives credits that can be sold. Each program has its own label for credits, such as Certified Emission Reductions (CERs), Verified Emission Reductions (VERs), or Climate Reserve Tonnes (CRTs).

Many types of GHG reduction projects exist, each with approved methods. The Clean Development Mechanism (CDM) was the first major program to help develop carbon markets and provides a list of approved methods. However, each program has its own list of approved methods. For example, a method approved by one program, like ACR, cannot be used for another program, such as Verra’s Verified Carbon Standard.

Carbon credits are a way to set prices on carbon, along with taxes and trade rules like Carbon Border Adjustment Mechanisms (CBAM). While carbon credits can be used in different markets, some programs only accept certain types of credits based on factors like when the credit was created, where the project took place, or the project’s type.

Credit quality

The basic idea behind a carbon credit is that it can replace the need for a buyer to reduce their own carbon emissions. For this to work, using a carbon credit should result in the same or better environmental benefits compared to if the buyer had reduced their own emissions. The "quality" of a carbon credit refers to how certain we can be that using it meets this goal.

Carbon credits and programs that issue them have faced more attention in recent years because of concerns about their quality. Investigations have found problems with how some credits claim to reduce emissions or increase carbon removal. The Australia Institute reported 23 cases where carbon crediting programs had major issues, such as overestimating how much carbon was stored, counting the same credit more than once, or failing to provide extra environmental benefits that would not have happened without the project. Some projects that claim to remove more carbon than usual have been criticized for misleading claims, with some even increasing total emissions instead of reducing them.

The key factors that determine the quality of a carbon credit are five criteria:
• Additional: The credit must lead to environmental benefits that would not have happened otherwise.
• Robustly quantified: The amount of emissions reduced or carbon stored must be measured accurately.
• Permanent: The environmental benefits must last over time.
• Not claimed by another entity: The credit must not be used by more than one party.
• Not associated with significant social or environmental harms: The project should not cause harm to people or the environment.

Assessing carbon credit quality is possible. In response to growing concerns, many initiatives began around 2020 to help buyers and programs distinguish high-quality credits from low-quality ones. These efforts include open resources like OffsetGuide.org, labeling systems such as the Integrity Council for the Voluntary Carbon Market, which evaluates methods to see if they meet quality standards (called the Core Carbon Principle label), and the Carbon Credit Quality Initiative, which scores methods on a scale of 1 to 5 based on thorough analysis. For-profit companies also now rate individual projects by reviewing their documents to determine their quality.

The Paris Agreement crediting mechanism

In 2015, the Paris Agreement was created through international climate talks led by the UNFCCC. It includes rules about using carbon credits to help countries meet their Nationally Determined Contributions (NDCs). At COP27, negotiators agreed that carbon credits from Article 6 of the Paris Agreement should be called "mitigation contributions" to help countries reach their NDC goals.

Article 6 of the Paris Agreement has three ways for countries to work together on climate goals, including carbon credit markets. Article 6.2 allows countries to trade carbon credits directly through bilateral agreements. Article 6.4 creates a new international program to replace the CDM program. The third option, Article 6.8, focuses on cooperation that does not involve carbon credits and is not discussed here.

These rules allow countries to develop methods (excluding Article 6.8) to use carbon credits to meet their NDC goals under the Paris Agreement. Article 6.4, also called the Paris Agreement Crediting Mechanism (PACM), replaces the CDM program. It aims to improve the quality of carbon credits and set higher standards for the market.

CDM projects can become PACM projects if they meet the requirements. A group called the Article 6.4 Methodology Panel is reviewing CDM and other methods to see if they meet the stricter standards of the PACM. These standards will guide how projects are developed under PACM.

Project types

Some projects focus on forestry, such as stopping logging and planting new trees. Others involve renewable energy, like wind farms, energy from plants and waste (biomass and biogas), and power from water (hydroelectric dams). Energy efficiency projects also help. Additional efforts include removing carbon dioxide from the air, capturing and storing carbon dioxide, and reducing methane emissions in places like landfills.

Common terms

Forward crediting is a method that often causes problems because it can result in credits of poor quality. This process involves giving credits for expected reductions in emissions or increases in carbon removal, even before the actual work to reduce emissions or remove carbon has been completed.

The "vintage" of a carbon credit refers to the year the credit was created by a crediting program. This year usually matches the year a third party checks the project and confirms the creation of the carbon offset credit.

A registry is an essential part of a carbon crediting program. A registry, which is usually open for the public to view, keeps track of who owns carbon credits and when they are retired. It may include details such as the project's current status, project documents, the number of credits created, who owns them, when they are sold, and when they are retired.

History

In 1977, important changes to the US Clean Air Act created one of the first systems where companies could buy and sell emission reductions. This allowed companies that produced more pollution to pay others to reduce their emissions of the same pollutant by a larger amount. In 1990, updates to the same law started the Acid Rain Trading Program. This program introduced a system called "cap and trade," which let companies buy and sell emission reductions from other companies that invested in projects to cut pollution, all under a set limit on total emissions. During the 1990s, rules for the US Clean Water Act helped create programs like mitigation banking and wetlands offsetting. These programs set the foundation for later efforts to reduce carbon emissions.

In 1997, the first international carbon markets were created through the Kyoto Protocol. This agreement included three ways for developed countries to earn credits for reducing emissions. One of these was the Clean Development Mechanism (CDM), which expanded the idea of trading emission reductions globally. It focused on major greenhouse gases that cause climate change, including carbon dioxide (CO₂), methane, nitrous oxide (N₂O), perfluorocarbons, hydrofluorocarbons, and sulfur hexafluoride. The Kyoto Protocol was set to end in 2020 and replaced by the Paris Agreement. Countries are still working to decide how carbon offsets will be used in the Paris Agreement through discussions about its Article 6.

In November 2024, after many years of disagreement, leaders at the COP29 meeting in Baku, Azerbaijan reached an agreement on rules for creating, trading, and registering carbon credits. These credits allow countries that produce more emissions to buy credits from others. This provides money to support technologies that reduce emissions.

Economics

The economics of programs like the Kyoto Protocol is based on the idea that the cost to reduce pollution may vary between countries. Studies show that using flexible methods can lower the total cost of meeting pollution reduction goals. Offset and credit programs allow countries to meet their climate targets under the Paris Agreement more affordably. These programs may also help address the gap between current emissions and goals set by the United Nations Environment Programme (UNEP) in yearly reports.

Offset and credit markets are influenced by many sources of supply and demand, as well as different trading systems. Demand for these credits comes from rules set by international agreements, national laws, and voluntary commitments made by companies and governments. Voluntary carbon markets often involve private companies buying credits to meet their own goals for reducing greenhouse gases. In some cases, companies not covered by a specific emissions trading system may buy credits instead of purchasing offsets in a voluntary market.

These programs also provide other benefits, such as cleaner air, more plant and animal life, and better protection of water and soil. They can also create jobs, improve access to energy, and support gender equality. These programs may also help with education, technology sharing, and job creation. Some certification systems offer tools to measure these additional benefits.

Prices for offsets and credits vary because it is difficult to accurately measure the indirect value of reducing emissions. This uncertainty has made some companies hesitant to buy credits.

Emissions trading is now a key part of rules designed to control pollution, including greenhouse gases. These programs operate at local, national, and international levels. Under these systems, there is a limit, or "cap," on how much pollution can be released. Companies can choose the cheapest ways to reduce their emissions. A government or official body usually gives out or sells a limited number of permits, which allow a specific amount of pollution over a set time. Companies must have permits equal to their emissions. If a company wants to release more pollution, it must buy permits from others who are willing to sell. These programs are used for greenhouse gases because their effects on warming are the same no matter where they are released. The cost to reduce emissions varies depending on the source. The cap ensures that environmental goals are met.

Regulations and schemes

As of 2022, 68 carbon pricing programs were active or planned globally. International programs include the Clean Development Mechanism, Article 6 of the Paris Agreement, and CORSIA. National programs include Emissions Trading Systems (ETS), such as the European Union Emissions Trading System (EU-ETS) and the California Cap and Trade Program. Credits in these programs may include those issued by international or independent systems. Independent groups like Verra and Gold Standard also manage standards and crediting rules.

Under the Clean Development Mechanism, a developed country can support a greenhouse gas reduction project in a developing country, where such projects are usually less expensive. The developed country receives credits called Certified Emission Reductions (CERs) to help meet its emission targets, while the developing country gains investment, clean technology, or changes in land use. Under Joint Implementation, a developed country with high domestic emission reduction costs may fund a project in another developed country. Credits from this program are called Emission Reduction Units.

The International Emissions Trading program allows countries to buy and sell carbon credits internationally to cover emission limits set by the Kyoto Protocol. Countries with extra credits can sell them to countries that exceed their emission targets.

Nuclear energy projects are not eligible for credits under these programs. Projects under the Clean Development Mechanism must be approved by designated national authorities in the host country.

Article 6 of the Paris Agreement continues to support international offset and credit programs, including Clean Development Mechanism projects from the Kyoto Protocol. These programs now help countries meet their emission reduction goals outlined in their nationally determined contributions (NDCs).

The ITMO system requires "corresponding adjustments" to prevent double counting of emission reductions. Double counting happens if both the country where a project is located and the country buying the credits count the same reduction toward their targets. If a country uses ITMOs to meet its NDC, the host country must adjust its emissions budget by adding the higher total to its reports. Otherwise, Article 6.2 allows countries flexibility in creating trading agreements.

The supervisory board under Article 6.4 is responsible for approving methods, setting rules, and managing procedures. Work on this is expected to finish by the end of 2023. Emission Reduction (ER) credits issued will decrease by 2% to ensure the program reduces global emissions overall. An additional 5% reduction in ERs will fund adaptation efforts. Fees for program management are still being discussed.

Clean Development Mechanism projects may move to the Article 6.4 program if the host country approves and the project meets new rules, with exceptions for methodological rules. Projects can generally use existing CDM methods until 2025. Starting in 2026, they must follow all Article 6 requirements. Up to 2.8 billion credits could become eligible under Article 6.4 if all CDM projects transition.

Article 6 does not directly control voluntary carbon markets. In theory, carbon offsets can be issued and bought without referencing Article 6. A multi-tier system might develop, offering different types of offsets and credits for investors. Companies may purchase "adjusted credits" that prevent double counting, which could be more valuable if they support science-based targets or net-zero goals. Other offsets might support claims about environmental or social benefits, even if they are less valuable for emission reduction goals. Uncertainty remains about how Article 6 will affect future voluntary carbon markets and what investors can claim by buying different types of credits.

REDD+ is a UNFCCC framework focused on tropical regions in developing countries. It rewards countries for preserving forests or increasing forest carbon storage. It uses results-based payments to create financial value for stored carbon and supports biodiversity. REDD+ was introduced at COP11 in 2005 and has expanded into a major policy initiative to address deforestation and forest degradation.

In 2015, REDD+ was included in Article 5 of the Paris Agreement. REDD+ initiatives typically pay developing countries or their regional governments for reducing emissions from deforestation and forest degradation. The program has four stages: preparing for REDD+ (readiness), securing funding agreements, measuring and verifying results, and receiving payments based on results.

Over 50 countries have national REDD+ programs. REDD+ also operates through provincial, district, and local governments, as well as private landowners. As of 2020, more than 400 REDD+ projects were active globally. Brazil and Colombia have the largest areas covered by REDD+ projects.

The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is a global program to reduce emissions from international flights. It allows credits and offsets for emissions that cannot be reduced through technology, operations, or sustainable aviation fuels. To ensure environmental integrity, CORSIA lists eligible offsets. Rules are similar to existing trading systems and carbon certification standards. CORSIA began in January 2019, requiring airlines to report CO2 emissions annually. Since January 2021, international flights must offset emissions under CORSIA.

Markets

Compliance market credits make up most of the offset and credit market today. In 2021, trading in voluntary carbon markets reached 300 million metric tons of CO2e. By comparison, trading in compliance carbon markets was 12 billion metric tons of CO2e, and global greenhouse gas emissions in 2019 were 59 billion metric tons of CO2e.

Several exchanges trade carbon credits and allowances for both spot and futures markets. These include the Chicago Mercantile Exchange, CTX Global, the European Energy Exchange, Global Carbon Credit Exchange (gCCEx), Intercontinental Exchange, MexiCO2, NASDAQ OMX Commodities Europe, and Xpansiv. Many companies now work on programs to reduce emissions, offset emissions, and store carbon. These programs create credits that can be sold on exchanges.

At the start of 2022, there were 25 operational emissions trading systems worldwide. These systems cover areas representing 55% of global GDP and account for 17% of global emissions. The European Union Emissions Trading System (EU-ETS) is the second-largest trading system after China’s national carbon trading scheme. It covers over 40% of European greenhouse gas emissions. California’s cap-and-trade program covers about 85% of its statewide greenhouse gas emissions.

Voluntary carbon markets (VCM) are markets where carbon offsets are traded by companies, individuals, and organizations that are not legally required to reduce emissions. In these markets, businesses or individuals use carbon offsets to meet their own emission reduction goals. Credits are given based on standards set by independent groups. Some credits are also approved through international or domestic programs. National and local programs have become more popular.

Many groups operate in voluntary carbon markets, including developers, brokers, auditors, and buyers. Certification programs for VCMs set rules for accounting, project eligibility, and monitoring, reporting, and verification (MRV) for credit and offset projects. These include the Verified Carbon Standard by Verra, the Gold Standard, the Global Carbon Council in Qatar, the Climate Action Reserve, the American Carbon Registry, and Plan Vivo. Puro Standard, the first standard for engineered carbon removal, is verified by DNV GL. Isometric was the first registry to issue credits for enhanced weathering carbon removal. Other standards help validate co-benefits, such as the Climate, Community and Biodiversity Standard (CCB Standard) by Verra and the Social Carbon Standard by the Ecologica Institute. The Integrity Council for the Voluntary Carbon Market (ICVCM) sets the Core Carbon Principles (CCPs) as a benchmark for credit quality and checks whether programs meet "CCP-Eligible" standards.

Voluntary carbon markets currently represent less than 1% of the emission reductions pledged in national climate goals by 2030. They cover an even smaller portion of the reductions needed to reach the 1.5°C Paris temperature goal by 2030. However, the VCM is growing quickly. Between 2017 and 2021, the number of VCM credits issued and retired more than tripled. Some predictions suggest global VCM demand could increase 15 times by 2030 and 100 times by 2050. Carbon removal projects, such as forestry and carbon capture and storage, may become a larger part of this market compared to renewable energy projects. However, some large companies are becoming less willing to use VCM credits because of the many standards involved, even though they aim for net zero emissions.

In 2022, VCM prices ranged from $8 to $30 per tonne of CO2e for common offset projects. Several factors affect these prices. The cost to develop a project is a major factor. Projects that store carbon have recently sold for higher prices than those related to renewable energy or energy efficiency. Projects that store carbon are also called Nature-Based Solutions. Projects with extra social or environmental benefits often have higher prices. Credits from well-known organizations may also cost more. Credits from developed countries may be priced higher because companies prefer to support projects near their operations. Credits with older dates are often worth less on the market.

Compliance market prices are generally higher. They vary by region, with EU and UK ETS credits trading at higher prices than those in the US in 2022. Lower VCM prices are partly due to an oversupply of credits compared to demand. Some types of offsets can be created at very low costs under current standards. Without this surplus, VCM prices could be at least $10 per tonne of CO2e higher.

Some predictions suggest VCM prices could rise to as much as $47–$210 per tonne by 2050. Prices might also spike temporarily in certain situations. A major factor in future pricing is how much climate policies support permanent carbon removal programs. This could reduce the supply of approved offsets and increase prices.

Demand for VCM offsets is expected to grow five to ten times over the next decade as more companies commit to Net Zero goals. This could help reduce greenhouse gas emissions. If offset prices remain much lower than predicted, companies might face criticism for "greenwashing," which means claiming credit for projects that would have happened anyway. At prices of $100 per tonne of CO2e, technologies like reducing deforestation, restoring forests, carbon capture and storage, bioenergy with carbon capture and storage, and renewable energy in least developed countries could reduce emissions by about 2 billion metric tons of CO2e annually between now and 2050. As offset costs rise, companies may invest more in reducing emissions from their supply chains.

Verra was created in 2005. It is a widely used voluntary carbon standard that also provides specific methods for REDD+ projects. By 2020, over 1,500 projects had been certified under Verra’s standards, covering energy, transport, waste, forestry, and other sectors. In 2021, Verra issued 300 million metric tons of CO2e in offset credits for 110 projects. Most forest credits in the voluntary market and nearly all REDD+ projects use Verra’s program.

The Gold Standard was created in 2003 by the World Wide Fund for Nature (WWF) with input from an independent advisory board. Projects can be led by non-government or community-based organizations. Eligible projects include renewable energy, energy efficiency, afforestation, reforestation, and agriculture. The program also supports the Sustainable Development Goals. Projects must meet at least three of these goals in addition to reducing emissions. They must also improve the economic, environmental, and social well-being of local communities. Monitoring rules help ensure these requirements are met.

Types of offset projects

Many projects can help reduce greenhouse gas (GHG) emissions and create carbon offsets and credits. These projects include improving land use, capturing methane, storing carbon in plants, using renewable energy, and increasing industrial energy efficiency. Other examples include reducing methane emissions, planting trees, and switching to fuels that do not add carbon to the atmosphere. The Clean Development Mechanism (CDM) lists over 200 types of projects that can generate carbon offsets and credits. An example of land use improvement is managing forests more carefully.

Certification programs and carbon trading systems vary in how they decide which projects qualify for offsets or credits. The European Union Emission Trading System (EU ETS) does not include nuclear energy projects, planting new forests, or projects that destroy industrial gases like HFC-23 and N2O.

Renewable energy projects can include hydroelectric power, wind energy, solar panels, solar water heating, biomass energy, and heat production. These projects help societies move away from using fossil fuels for electricity and heating toward cleaner energy sources. However, they may not always qualify as offset projects because it is hard to prove whether the project would have happened without the credit. These projects often earn money and may involve government support or complex financial agreements, which can make them ineligible for some offset programs.

Methane is a strong greenhouse gas. It is often released from landfills, farm animals, and coal mining. Methane projects can create carbon offsets by capturing methane and using it for energy. Examples include using an anaerobic digester to trap methane from farm waste, or capturing methane in landfills and industrial waste.

Carbon offsets that fund renewable energy projects help reduce the amount of carbon in energy production. Energy conservation projects aim to lower the total need for energy. Carbon offsets in this area support three main types of projects.

Cogeneration plants produce both electricity and heat from the same energy source. This improves energy efficiency because most power plants waste heat energy. Fuel efficiency projects replace equipment that uses more fuel with ones that use less fuel for the same amount of energy. These projects can optimize industrial processes to lower energy costs or encourage actions like cycling to work instead of driving.

Industrial pollutants such as hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs) have a much greater warming effect than carbon dioxide. These pollutants are easy to capture and destroy at their source, making them a low-cost way to create carbon offsets. Reducing HFCs, PFCs, and N2O accounts for 71% of carbon offsets issued under the CDM. Many of these pollutants are now banned by an update to the Montreal Protocol, so they are often no longer eligible for offsets or credits.

Land use, land-use change, and forestry projects are grouped under the label LULUCF. These projects focus on natural areas that store carbon, like forests and soil. There are many types of LULUCF projects. Forestry-related projects aim to stop deforestation by protecting existing forests, restoring forests on land that was once forested, and creating forests on land that was not previously forested. Soil management projects work to keep or increase the amount of carbon stored in soil.

Deforestation is a major source of greenhouse gas emissions, especially in Brazil, Indonesia, and parts of Africa, where it contributes about 20% of emissions. Carbon offsets allow companies to pay for forest protection or provide alternatives to products made from forests. Programs like REDD (Reducing Emissions from Deforestation and Forest Degradation) help developing countries protect forests, and these programs are now also used in developed countries like the United States and the United Kingdom.

China has a policy for forestry carbon credits. These credits are based on measuring how much forests grow, which is converted into carbon emission reductions by government agencies. Forest owners, who are often rural families or villages, receive tradeable certificates called "carbon tickets" (碳票; tan piao) that can be sold.

Processes

An offset project is created by project developers, funded by investors, checked by a separate group, and added to a carbon offset program. When a program officially registers a project, it means the project has been approved and can begin creating carbon offset credits once it starts. Most carbon offset programs have a list of approved methods that cover different types of projects. After a project starts, programs often check it regularly to measure how much emissions are reduced. The time between checks usually lasts about one year. Once a program approves the check results, it gives carbon offset credits, which are stored in the project developer's account in a system managed by the offset program.

Standards for evaluating the quality of offsets and credits usually include the following areas:

• Baseline and Measurement
• Additionality
• Leakage
• Permanence
• Double counting
• Co-benefits

In addition to the certification programs described, industry groups have worked since the 2000s to improve the quality of these projects. The International Carbon Reduction and Offset Alliance (ICROA) was formed in 2008. It encourages good practices in the voluntary carbon market. ICROA includes companies that provide carbon offset services in the United States, Europe, and Asia-Pacific regions. These companies agree to follow the ICROA Code of Best Practice.

Other groups are now promoting new methods to ensure offsets and credits are reliable. The Oxford Offsetting Principles say traditional carbon offset programs may not help achieve net zero emissions. These principles instead emphasize reducing emissions first and using carbon removal projects that store carbon long-term. They also support creating offset projects that align with net zero goals. The Science Based Targets initiative’s net-zero standards argue that offsets should focus on carbon that has been removed from the atmosphere, such as CO2 Removal Certificates, rather than just reducing or avoiding emissions.

Some efforts aim to improve the quality of current carbon offset and credit projects. The Integrity Council for the Voluntary Carbon Market has created a draft set of rules to define high-quality carbon credits. These rules are called the Core Carbon Principles. Final guidelines for this program are expected in late 2023. The Voluntary Carbon Markets Integrity Initiative developed a code of practice in 2022. The UK government partially funds this initiative.

Limitations and drawbacks

The use of carbon offsets and credits has been criticized for several reasons. Some people believe these tools allow companies to continue normal practices without making major changes to reduce carbon emissions directly.

A study by The Australia Institute found that about 25% of carbon offsets may not be reliable, calling them "hot air." Some reports also say that carbon offsets might be used to support fossil fuel projects, which could slow efforts to cut emissions. This practice is called "greenwashing." Pope Francis warned in his 2015 letter Laudato si' that some groups might use carbon credits to justify high levels of consumption.

Some carbon sequestration projects have been criticized for overestimating their ability to remove carbon from the atmosphere. In some cases, these projects actually increased total emissions.

In 2023, a lawsuit was filed against Delta Air Lines for using carbon credits to claim carbon neutrality. A 2016 study by the Öko-Institut found that 85% of carbon credit projects under a program called CDM had a low chance of being truly effective or accurately measuring emission reductions. In 2023, the University of California stopped buying carbon credits and focused instead on reducing emissions directly.

Another issue is that current carbon pricing and policies may not be strong enough to meet climate goals. However, some research shows that companies using carbon credits may make more ambitious emissions cuts than those that do not.

Experts say that carbon offsets, such as forest protection, reforestation, or carbon capture, may let polluting companies continue emitting greenhouse gases. These tools might also support untested solutions that are not proven to work.

There are many certification standards for carbon credits, but no single standard controls the industry. Some offset providers have been criticized for making exaggerated or misleading claims. For example, carbon credits issued by the California Air Resources Board used a formula that simplified how much carbon was stored in forests.

A study estimated that 20 million to 39 million forestry credits from California’s cap and trade program did not provide real climate benefits. This is nearly one-third of all credits issued through that program. The Australia Institute also noted that Australia’s carbon offset system lacks independent checks and transparency, making it hard to verify the effectiveness of projects.

Determining whether a carbon project is "additional" (meaning it would not happen without offset funding) is difficult. Projects that are profitable without offset money or required by laws are usually not considered additional. A full review of each project is needed to decide if it truly reduces emissions.

Carbon offsets can create problems by rewarding companies for emitting more, so they can later claim credit for reducing emissions from a higher starting point. Regulators could fix this by setting clear standards for verification, uniqueness, and transparency.

Forestry projects have faced criticism for not being reliable. Stories from 2021 to 2023 questioned the effectiveness of nature-based carbon offsets, the REDD+ program, and certification groups. One report said that about 90% of rainforest credits from the Verified Carbon Standard may be "phantom credits" that do not deliver real benefits.

Tree-planting projects are especially controversial. Trees take decades to grow, and it is hard to guarantee forests will last long enough to store carbon. They may be destroyed by fires, cleared, or mismanaged. Some projects use fast-growing invasive species that harm native forests and reduce biodiversity. Some certification standards now require planting multiple species to address this.

Planting trees in high-latitude forests might actually warm the Earth because tree cover absorbs sunlight, which can balance out the carbon benefits. Tree-planting projects may also harm local communities and Indigenous people if they take over land or resources these groups rely on.

Carbon offsets are often used to reduce emissions from companies by funding projects like reforestation or renewable energy. However, these tools have limits. Many companies buy carbon credits without making real efforts to cut their own emissions directly. This has led to concerns about misuse and false claims.