Carbon markets run on jargon. This glossary decodes the 25 carbon market terms you’ll meet most often — in plain English, one or two sentences each.
The fundamentals
Carbon credit. A tradable certificate for one tonne of CO2-equivalent reduced, avoided, or removed. Carbon offset. Using a credit to compensate for your own emissions. CO2e (CO2-equivalent). A common unit converting other greenhouse gases (methane, N2O) into the warming impact of CO2. Tonne (metric ton). 1,000 kg — the universal unit of carbon accounting. Carbon footprint. Total greenhouse gases emitted by a person, product, or organization, expressed in CO2e.
Project and quality terms
Additionality. Proof that a project’s emissions cut wouldn’t have happened without credit revenue. Baseline. The emissions scenario expected without the project; credits equal baseline minus actual. Permanence. How durably carbon stays stored; forests can burn, geological storage lasts millennia. Leakage. When a project pushes emissions elsewhere — e.g., protecting one forest shifts logging to the next valley. Buffer pool. A reserve of unsold credits held back to insure against reversals like wildfire. Vintage. The year a credit’s emission reduction occurred; recent vintages command premiums. Methodology. The approved recipe for measuring a project type’s climate benefit. MRV. Measurement, Reporting, and Verification — the audit cycle behind every credible credit.
Market structure terms
Registry. The public ledger tracking every credit’s issuance, ownership, and retirement. Retirement. Permanently cancelling a credit to claim its tonne; the end of its life. Voluntary carbon market (VCM). Where credits are bought by choice. Compliance market. Where law obliges companies to surrender allowances or credits. Allowance. A government-issued permit to emit one tonne within a cap-and-trade scheme. Cap-and-trade. A system with a shrinking emissions cap and tradable allowances. Avoidance credit. From preventing emissions (avoided deforestation, clean cookstoves). Removal credit. From physically extracting CO2 (reforestation, direct air capture, biochar).
Policy terms
Article 6. The Paris Agreement’s rules for trading emission reductions between countries. ITMO. Internationally Transferred Mitigation Outcome — a credit transferred country-to-country under Article 6.2. Corresponding adjustment. The bookkeeping step preventing two countries from counting the same tonne. CORSIA. The UN scheme requiring airlines to offset growth in international aviation emissions.
Using this glossary
Bookmark this page — every other guide on this site links back here. If a seller uses a term you don’t see explained, that’s not sophistication; it’s usually a red flag worth questioning.
Related reading: What Are Carbon Credits? · How Do Carbon Credits Work?
