What are carbon credits? The green currency of climate action

Carbon credit prices vary globally. Prices vary according to market type, project category, location, vintage, methodology, verification standard, demand, supply, and eligibility for a particular compliance programme. Credits with stronger integrity assessments or additional social and environmental benefits may command premiums. In regulated systems, exchange trading and market rules support price discovery; in voluntary markets, buyers and sellers negotiate values based on quality and demand.

Yes, but international use depends on the rules governing the credit and the purpose for which it is bought. Article 6 of the Paris Agreement allows countries to cooperate by transferring authorized mitigation outcomes. Where a reduction is counted towards another country’s climate target, corresponding adjustments help prevent both countries from claiming it. Credits used for airlines, compliance systems, or voluntary claims may also face separate eligibility and authorization requirements.

Under India’s Carbon Credit Trading Scheme, accredited carbon verification agencies independently examine emission data and project claims. For compliance entities, they verify reported emissions and emission intensity. For offset projects, they assess the baseline, additionality, monitoring records, and calculated reductions or removals. The Bureau of Energy Efficiency reviews the verified documentation before certificates are approved and issued through the registry. 

In India, Carbon Credit Certificates may be sold by registered entities that hold valid certificates issued under the Carbon Credit Trading Scheme (CCTS). These include obligated entities that reduce their greenhouse gas emission intensity beyond notified targets and non-obligated entities that generate certificates through eligible registered offset projects. The certificates issued may then be traded in accordance with the CCTS framework.

Companies purchase carbon credits for two distinct reasons. In compliance markets, they may need certificates to cover a regulatory shortfall. In voluntary markets, they may retire high-quality credits to finance climate action beyond their value chain and support credible climate claims. Responsible buyers do this alongside continued reductions across their operations and supply chains, with transparent disclosure of the credits purchased, retired, and used in any public claim.

UNDP supports governments, rather than individual credit buyers, by helping countries build the rules and institutions needed for high-integrity carbon markets. Its assistance covers market access strategies, Article 6 readiness, domestic trading systems, legal and regulatory frameworks, technical capacity and stakeholder coordination. UNDP also promotes safeguards, fair benefit sharing and stronger participation by Indigenous Peoples, local communities, women and other rights-holders so carbon-market finance supports national climate and development priorities.

Major certification frameworks include Verra’s Verified Carbon Standard, Gold Standard for the Global Goals, ACR, the Climate Action Reserve, and the UNFCCC’s Article 6.4 mechanism. Each applies its own eligibility rules, methodologies, safeguards, validation, monitoring, verification, and registry procedures. Certification, therefore, shows that a project has followed a recognized programme’s requirements, but buyers should still examine credit quality, permanence, additionality, double-counting controls, and any claimed social benefits.

A carbon tax directly charges emitters a government-set price for each tonne of covered greenhouse gas emissions. A carbon credit, by contrast, represents a verified reduction or removal that can be transferred or used under applicable rules. With a tax, authorities set the price, and the resulting emissions response varies. In a trading or crediting system, market activity helps determine the value of eligible units.

To integrate carbon credits into a CSR strategy, first define the social or environmental outcome the company wants to support, such as clean energy access, livelihoods, waste management, or ecosystem restoration. Then select high-integrity projects with credible community benefits, clarify benefit-sharing arrangements, retire the credits, and report outcomes transparently. For Indian companies, the purchase should not automatically be treated as statutory CSR expenditure; eligibility must be assessed separately under Section 135 and Schedule VII