A tradable good that certifies that a certain amount of GHG emissions was avoided or removed. By buying a carbon credit, a company or individual finances the project reduction or removal project and compensates - or offsets - their own emissions.

A characteristic of a Voluntary Carbon Markets Credit. The underlying projects could not exist without the funding from the carbon credit. In other words, the projects wouldn’t be viable in their own right, all other things equal (regulations, government funding, other policies…). If credits are awarded to activities that would have happened anyways, the process becomes meaningless.

The trading unit is the carbon allowance, which represents the right to draw 1 ton of carbon from a capped carbon budget. In compliance markets, a regulatory entity fixes a certain amount (the cap) of allowed emissions for the year (the budget), and industrial polluters need to purchase allowances equivalent to their emissions. There are only as many allowances as the budget allows: the supply is capped. It is a regulated market in the sense that buyers have an obligation to hold allowances in equivalence to their emissions. Allowances are standard units issued by the regulatory body.