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Carbon offsets, carbon markets and COP26: what you need to know

The second week of the COP26 conference in Glasgow is nearly through, and negotiators are kicking talks into high gear on some key action items.

One set of terms that you’ve likely heard over the past week or so is “carbon offset”, “carbon credit” or “carbon markets”. Here's what you need to know about this topic as we head into the final days of COP26.

What is a carbon offset/carbon credit?

A carbon offset or carbon credit (the terms are often used interchangeably) is simply one tonne of avoided or sequestered greenhouse gas emission (GHG) achieved because of measurable, verifiable, and additional (going above and beyond business as usual) emissions reductions projects.

These reductions are quantified, verified by a third-party, and “credit” for the reductions is issued by a registry.

Projects themselves have a diverse range. They can include anything from planting trees to using agricultural techniques that draw increased levels of carbon into the soil to replacing fuel sources with non-emitting forms, and more.

The key requirements are that they take place as a result of new investment and that they are measured/quantified and verified by a third party.

What are carbon markets?

Carbon markets or “registries” are the places where carbon credits live. Once registered, the credits can be purchased and traded among parties using the several different registries that exist.

There are two types of carbon markets:

  • global voluntary markets (used mainly by businesses to invest in GHG reduction initiatives and for Environmental, Social, and Governance or ‘ESG’ reporting); and

  • compliance markets, which are regulated by national, regional, or provincial laws that require emitters to achieve certain levels of reduction.

What is happening at COP26?

The topic of carbon offsets has been a recurring theme at COP26. The crux of the debate is around how we can responsibly use carbon offsets as a tool to encourage investment in decarbonization around the world.

To date, there have been accusations and instances of companies and project developers “double counting” offsets (meaning that the same emissions reductions were sold multiple times) and other concerning trendsparticularly when it comes to voluntary carbon markets.

A taskforce on scaling up the use of voluntary carbon markets has already held an event at COP26 wherein the use of these markets and the rules surrounding them was a key focus area.

In terms of reaching net zero by 2050, carbon offsets can have a key role to play as a tool to spur investment in green projects.

But, we need COP26 to be a forum that provides clarity and agreement on the rules surrounding these markets and eliminate the concerns and abuse of these markets that we’ve seen to date.


Chad Richards is the Director of the Net Zero Partnerships program.


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