What is a carbon credit ?

The French government’s CSR portal defines a carbon credit as “a transferable or tradable instrument representing a reduction or removal of one ton of CO₂ equivalent emissions, which is issued and verified in accordance with recognized quality standards”⁽¹⁾.
Essentially, when projects lead to a reduction of greenhouse gas (GHG) emissions or to the removal of GHG from the atmosphere, those projects may be awarded carbon credits. One carbon credit represents 1 ton of CO₂ equivalent emissions avoided or removed.
Carbon credits can be used by companies as part of their carbon accounting : essentially, a company that emits 3 tons of CO₂ eq. and holds 3 carbon credits, whether by implementing a project or by purchasing them, can claim to be carbon neutral.

Beneficial projects

Part of the idea behind carbon credits is to support the financing of projects that help tackle climate change. Carbon credits generated through projects that prevent GHG emissions are the most common². Many of these projects are centered around the protection against deforestation or the development of renewable energy. As for projects allowing to remove GHG from the atmosphere, they often consist in planting trees. In addition to the potential benefits of these projects for our environment, they often result in financial flows from the Global North to the Global South, which can benefit local communities.

A counterproductive mechanism

Despite these positive aspects, carbon credits have significant limitations. First of all, and this is an important point, they can become a driver of climate inaction. Indeed, the concept of “carbon offsetting”, may discourage stakeholders from reducing their emissions, since those emissions can be offset. Furthermore, this negative impact is difficult to mitigate because it is not related to the quality of carbon credits or to their oversight. However, to limit ongoing climate change, it is essential to avoid all emissions that can be avoided, to reduce as much as possible those that can’t be avoided, and, only as a last resort, to offset the remaining emissions.

Overestimated emissions reductions

But the question of the quality of carbon credits also needs to be addressed. In 2023, an investigation conducted by The Guardian and Die Zeit along with the non-profit organisation SourceMaterial revealed that climate benefits were overestimated for a significant portion of marketed carbon credits³. Since then, a study by Romm et al.⁴ published in 2025 reviewed the scientific litterature on the subject and also concluded that there were major quality issues. The issues identified by the authors include :

• Additionality : it is essential that the GHG emission reductions enabled by a carbon credit be additional, meaning that they wouldn’t have happened without the project. However, the authors explain that this is very difficult to demonstrate and that several studies have shown that this criterion is not always met by the carbon credits on the market.

• Permanence : the reduction or the removal of emissions must be permanent, or at least durable. For example, while planting trees can allow the capture of GHG from the atmostphere, these GHG would be released in the atmosphere all at once in the event of a fire (moreover, forest fires are increasingly frequent due to climate change).

• Leakage : for example, when a project aims to protect a forest from deforestation, it is likely that another area will be deforested instead. In this case, emissions are not avoided, but simply transfered from one place to another.

Because of all of these factors, carbon credits are often criticised as a form of greenwashing, and the term “treewashing” is even being used to describe afforestation or forest conservation projects. Among tech giants, Apple was actually found guilty of misleading advertising by a German court in august of 2025⁵. This is because they claimed their smartwatch was carbon-neutral, even though the company used carbon credits without being able to demonstrate that the resulting reductions in GHG emissions would be durable.

Environmental and social issues

While carbon credits don’t always allow for a reduction in GHG emissions, they can also lead to other environmental issues. In particular, certain projects can have harmful impacts on biodiversity. It is for example the case in some afforestation projects where monocultures of fast-growing exotic species are planted to maximise potential carbon sequestration. These types of projects contribute to biodiversity loss and destabilise local ecosystems.
Social issues have also been reported⁴. While some projects may benefit local communities, others pose serious threats to human rights, particularly through land grabbing, forced evictions, intimidations and arbitrary detainments.

💡 Tip !

Beware of claims such as “carbon neutral” or “net zero emissions”, but also of the carbon intensities of electricity mixes advertised by some hosting providers or used by some companies in their carbon footprint calculations. In fact, a system similar to that of carbon credits exists for electricity in the form of guarantees of origin. These certificates are intended to guarantee to the buyer that a selected portion (or even all) of the electricity they consume has been generated from renewable sources. However, it is not possible to choose which electrons power a data center and a recent review has shown that guarantees of origin don’t actually promote the development of renewable energy over fossil fuels⁶. So make sure that the carbon intensities for the electricity mixes are “location-based”, i.e. that they are consistent with the physical reality of the network, rather than “market-based”, i.e. factoring in contracts and the purchase of guarantees of origin.

(1) https://portail-rse.beta.gouv.fr/glossaire-rse/credit-carbone/
(2) Ecosystem Marketplace (2025). 2025 state of the voluntary carbon market.
(3) https://www.theguardian.com/environment/2023/jan/18/revealed-forest-carbon-offsets-biggest-provider-worthless-verra-aoe
(4) Romm, J., Lezak, S., & Alshamsi, A. (2025). Are carbon offsets fixable?. Annual Review of Environment and Resources, 50(1), 649-680.
(5) https://www.lemonde.fr/pixels/article/2025/08/27/la-justice-allemande-remet-en-cause-les-pretentions-d-apple-en-matiere-de-neutralite-carbone_6636468_4408996.html
(6) Langer, L., Brander, M., Lloyd, S. M., Keles, D., Matthews, H. D., & Bjørn, A. (2024). Does the purchase of voluntary renewable energy certificates lead to emission reductions? A review of studies quantifying the impact. Journal of Cleaner Production, 478, 143791.

© Cover picture Vectorjuice, Freepik