Carbon credits have become a buzzword in the fight against climate change but behind the jargon lies a multi-billion-dollar mechanism which is reshaping how companies, individuals and countries account for emissions.
At its simplest, one carbon credit equals one metric ton of carbon dioxide that is either removed from the atmosphere or prevented from being emitted. Companies, especially those with net-zero targets often purchase these credits to offset emissions that they are unable to eliminate internally.
Types Of Carbon Credits And Their Uses
When it comes to carbon credits, there are two main markets, the compliance market and the voluntary markets. Compliance markets are regulated systems where governments require companies to cap or offset their emissions. The most prominent example is the European Union’s Emissions Trading System, the world’s largest carbon market. While the United States does not have a national carbon credit system system, several state-level compliance markets exist, most notably California’s Cap-and-Trade Program and the Regional Greenhouse Gas Initiative, which includes 11 northeastern states. These markets place legally binding limits on emissions and allow companies to trade allowances or buy approved carbon credits to stay within regulatory thresholds.
As it relates to voluntary carbon markets, they allow companies and individuals to buy carbon credits outside of legal requirements, often to meet net-zero goals or enhance ESG credentials. Unlike compliance markets, participation is optional, but interest is growing. Credits are issued by independent registries but the market has faced criticism for inconsistent standards, greenwashing, and questionable impact. Integrity is now the currency of trust.
The Carbon Credit Market
According to a 2023 report by Boston Consulting Group, the voluntary carbon market surged past $2 billion in 2021, four times its 2020 value, and could grow to $10 to $40 billion by 2030 as demand accelerates. A 2025 Carbon Market Watch report highlighted that, Shell was the largest buyer of carbon credits in 2024, a year when fossil fuel companies dominated the voluntary market. Among the top 10 buyers with disclosed data, eight came from high-emission industries such as energy, aviation and automotive, raising concerns that offsets are being used to project climate leadership while core operations remain unchanged.
Carbon credits are generated from a range of climate projects, but not all deliver the same environmental value. Some remove carbon already in the atmosphere, while others aim to prevent new emissions. The effectiveness, permanence, and co-benefits of each project type can vary widely, which is why understanding the source of a credit is critical. Offsets may stem from:
- Renewable energy investments
- Reforestation and avoided deforestation
- Soil carbon and regenerative agriculture
- Methane capture from landfills or livestock
- Efficient cookstove distribution in developing regions
Among these, projects like clean cookstove distribution, biochar, and mangrove restoration are increasingly recognized for their strong climate impact, verifiability, and co-benefits, while others such as certain large-scale forestry or legacy renewable projects require closer scrutiny.
Carbon Credit Certification
Registries such as Verra, Gold Standard, and the American Carbon Registry certify these projects, but the market has also faced criticism, particularly over phantom credits where some offsets do not deliver any real climate benefit.
When it comes to the Caribbean, islands like Jamaica, must engage in this market strategically. With forestry potential and renewable energy expansion goals, the region stands to benefit both environmentally and economically if proper governance and community inclusion are prioritized.
As the carbon credit market expands, so does the responsibility to ensure that climate action is both credible and effective. For companies, governments, the path forward requires transparency, strong verification, and a focus on projects that deliver measurable environmental and social value. Offsets alone will not solve the climate crisis, but when backed by integrity and paired with real emissions reductions, they can play a meaningful role.
In the next article in this series, we will explore carbon capture and direct air removal, technologies that promise to remove emissions from the atmosphere. Are they the climate fix we need or just another form of delay?
