Carbon credits, also known as carbon allowances, are a type of market-based instrument that allow companies, governments, and other organizations to address their greenhouse gas emissions by funding projects that reduce or remove carbon dioxide from the atmosphere. Carbon credits are a transferrable financial instrument certified by governments or independent certification bodies to represent an emission reduction of one metric ton of CO2, or an equivalent amount of other greenhouse gases (GHGs) . One carbon credit represents the reduction or removal of one ton of carbon dioxide or its equivalent in other greenhouse gases. Carbon credits are issued by national or international governmental organizations and are measured in tonnes of carbon dioxide-equivalent (CO2e) .

Carbon credits are a component of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHGs) . In these programs, greenhouse gas emissions are capped and then markets are used to allocate the emissions among the group of regulated sources. The goal is to allow market mechanisms to drive these sources towards lower GHG emissions. Companies or nations are allotted a certain number of credits and may trade them to help balance total worldwide emissions. The ultimate goal of carbon credits is to reduce the emission of greenhouse gases into the atmosphere.

Carbon credits are a transparent, measurable, and results-based way for companies to support activities such as protecting and restoring irrecoverable natural carbon sinks, like forests or marine ecosystems, and scaling nascent carbon removal technology that keep global climate goals within reach. Carbon credits create a monetary incentive for companies to reduce their greenhouse gas emissions and encourage the adoption of cleaner, more sustainable practices.

In summary, carbon credits are a market-based instrument that allows companies, governments, and other organizations to address their greenhouse gas emissions by funding projects that reduce or remove carbon dioxide from the atmosphere. Carbon credits are issued by national or international governmental organizations and are measured in tonnes of carbon dioxide-equivalent (CO2e). The ultimate goal of carbon credits is to reduce the emission of greenhouse gases into the atmosphere and encourage the adoption of cleaner, more sustainable practices.