How does a carbon credit work?

The key players in the chain are the project developer (who implements practices on the ground), the certification standard (Gold Standard, Verra, ISO), the independent auditor (who verifies volumes), the public registry (which records and tracks each credit), the broker (like Arka, who connects supply and demand), and the final buyer (who retires the credit for their balance sheet).

A 'high-integrity' credit meets the ICVCM's Core Carbon Principles (CCP): demonstrated additionality, guaranteed permanence, documented co-benefits, and no double counting.

Not all 'credits' are equal, and confusion between issued, estimated and ex-ante credits is a frequent source of error. An issued credit has been audited, validated by the standard, and recorded as a transferable asset on a public registry; it can be bought and retired. An estimated (or projected) credit is only a statistical projection based on a methodology: it has no value until verified. An ex-ante credit is a future volume secured through an offtake agreement: the buyer commits to a price and volume, the developer secures financing, but registry issuance only happens after verification, sometimes several years after signing. This distinction is central for reporting: only issued, retired credits can appear in a CSRD or ESG report.

The carbon market splits into two very different segments. The compliance market covers mandatory schemes, the best-known being the EU ETS, which caps emissions from heavy industry and energy in Europe. EU ETS allowances trade around 60 to 100 €/tCO₂e in 2025-2026, under strict regulatory oversight. The Voluntary Carbon Market (VCM) covers credits freely purchased by companies for their climate strategy, outside any obligation. It mainly finances sequestration and avoidance projects in forestry, agriculture, renewable energy and capture. The two markets are not interchangeable: a VCM credit cannot be used for an EU ETS obligation, and vice versa.

Prices on the voluntary market reflect technical quality and project scarcity. In 2025, the observed ranges are: REDD+ forest avoidance credits between 5 and 15 €/tCO₂e; cookstoves and energy efficiency between 3 and 10 €/tCO₂e; forest removal credits (afforestation) between 20 and 60 €/tCO₂e; Gold Standard certified soil removal credits between 80 and 200 €/tCO₂e; technological removals (DAC, BECCS) between 300 and 1000 €/tCO₂e. Factors that push prices up include the removal vs avoidance status, CCP certification, fine geographic traceability, verifiable co-benefits and recent vintage. Serious B2B buyers now reason in portfolio mix rather than lowest price.

The role of the public registry is often underestimated, yet it is the cornerstone of traceability. Every certified credit has a unique identifier, generated at issuance by the standard. The Gold Standard Registry, the Verra Registry (VCS) or the Label Bas-Carbone registry publish open-access information on project name, methodology, vintage, volume, transactions and status (issued, transferred, retired, cancelled). This publication prevents double counting: one tonne can only be claimed once by one entity. For a buyer, checking the retirement number on the public registry should be a systematic step before any reporting. This is what distinguishes a high-integrity credit from a fragile asset.