Carbon credits

Some EU and International agreements put in place ways in which carbon credits can be used to help meet emissions targets.

There are two main types of carbon credits: regulated emission allowances and voluntary emission reduction credits.

A regulated emission allowance is a permit which a company or facility must buy or trade in order to release one tonne of carbon dioxide, or the equivalent of some other greenhouse gas. Because allowances cost money and can be traded, there is an incentive to become more efficient and innovative to avoid having to buy allowances.

A voluntary emission reduction credit is a certificate showing that a company or community has taken action and has proved they have achieved a real reduction in emissions or have successfully removed carbon dioxide from the air, for example, by rewetting a drained bog.  The certificate can be sold to support emissions reductions or carbon dioxide removal.   


Related Terms






Building Energy Rating (BER)

Cap and trade system

Carbon emissions

Carbon leakage

Carbon sequestration and storage

Carbon credits

Carbon footprint

Carbon neutral

Carbon tax

Circular economy


Climate Action Fund

Climate Action Plan

Climate change


District heating


EU Emissions Trading System (ETS)

F-gases or fluorinated gases

Fossil fuels


Green hydrogen

Greenhouse Gas Emissions / GHGs


Renewable Electricity Support Scheme (RESS)

Renewable energy

Retrofitting (energy retrofitting)