A carbon credit isn’t created when a project starts or when someone pays for it. It is created at the end of a checked process, when a crediting program issues it into a registry for reductions or removals that have already happened and been verified. This page walks through that process step by step.

It is part of our Learn section. For the whole life of a credit, including sale and retirement, see what a carbon credit is.

Who is involved?

Four parties take part in creating every credit:

  • The project developer designs and runs the project. Verra calls this party the project proponent, who must show the right to operate the project and the right to its reductions and removalsSource 3.
  • The crediting program, or standard, writes the rules and the methodologies. Verra’s methodologies set out detailed procedures and peer-reviewed formulas for quantifying a project’s greenhouse gas benefitsSource 2. Our page on carbon standards compares the main ones.
  • An independent auditor, called a validation and verification body (VVB), checks the project. Independent third-party validation and verification is one of the ICVCM’s ten Core Carbon PrinciplesSource 4.
  • The registry records the project and every credit issued, transferred and retired. See carbon registries.

The steps from project to issued credit

Programs differ in the details, but the cycle is broadly the same. The UN’s Clean Development Mechanism, the first global crediting mechanism, set out seven steps: project design, national approval, validation, registration, monitoring, verification and issuanceSource 1. Voluntary programs follow a similar path.

  1. Step 1: Design the project

    The developer writes a project description document that explains the activity, the methodology it will follow, the baseline it is measured against and how results will be monitored.

  2. Step 2: Validate the design

    An independent auditor checks that the design meets the program’s rules and that its assumptions are reasonable. Under the VCS, the auditor approves the final project description.

  3. Step 3: Register the project

    Once validated, the project is registered with the program and listed in its public registry.

  4. Step 4: Monitor results

    The developer runs the project and measures what it achieves against the baseline, following the methodology, over a monitoring period.

  5. Step 5: Verify the results

    An auditor checks the monitoring report and confirms the reductions or removals that actually happened.

  6. Step 6: Issue the credits

    The program issues one credit per verified tonne of CO₂e into the developer’s registry account, each with a unique serial number.

Under Verra’s VCS, for example, a project is first listed in the pipeline on the basis of a draft project description, then validated, registered, monitored and verified before it can request issuance of Verified Carbon UnitsSource 2.

Why validation and verification both matter

The two audits look at different things. Validation looks forward, at the project as designed. Verification looks back: in Verra’s VCS it is an ex-post assessment, based on historical data, of whether the project’s claim is materially correctSource 3.

Credits are issued after the fact

Under these programs, credits are issued for results that have already been verified, not for promised future outcomes. Isometric, for example, issues credits once a verified removal has taken placeSource 7. A forward contract for credits that don’t exist yet is a promise of future delivery, not an issued credit.

The process takes time. The VCMI notes that verification can take two to three years from project inception, so projects may generate credits for emissions already reducedSource 8. That is why a credit’s year of issuance and its vintage are often different.

What does an issued credit contain?

At issuance, the registry gives every credit a unique serial number so it can be traced through its life. Gold Standard’s Impact Registry generates a serial number for every issued credit, giving full traceability through the lifecycleSource 5.

Serial numbers usually encode details about the credit. The Climate Action Reserve’s format, for example, includes:

  • the registry and unit type
  • the project country, project ID and project type
  • the project developer ID
  • the vintage year
  • the issuance batch, with a start and end numberSource 6

Credits are issued in batches, each batch being the credits awarded to one project for one reporting periodSource 6.

What happens after issuance?

A newly issued credit sits in the developer’s registry account. From there it can be sold and transferred, often several times, until a buyer retires it to back a claim. Retirement takes it out of circulation, so it can be used only onceSource 2. Our page on carbon credit retirement explains how to check that step.

  1. 1

    CreatedVerified

    A project cuts or removes emissions; an auditor checks the numbers.

  2. 2

    IssuedActive

    A registry issues one credit per tonne, each with a serial.

  3. 3

    SoldTransferred

    A shop, marketplace or broker transfers it to you.

  4. 4

    RetiredRetired

    Cancelled in your name for good. Can’t be resold.

Fig. 1 — The life of a carbon credit. This page covers steps 1 and 2.

What this means when you buy

Knowing how credits are created tells you what to ask a seller:

  • Which program and methodology? The program’s rules decide how the tonnes were counted.
  • Was it verified, and when? Registries give access to project documents; Gold Standard’s, for example, publishes essential project documentationSource 5.
  • Is it already issued? An issued credit has a serial number in a public registry; a forward contract does not.

Reduce your own emissions first, then use credits for what is left. When you are ready to check a specific credit, our guide on how to verify carbon credits shows where to look.