You Were Misled About Carbon Credits. Here's How to Turn That into a Competitive Advantage.

You Were Misled About Carbon Credits. Here’s How to Turn That into a Competitive Advantage.

You’ve seen the headlines. Some carbon credit projects have been exposed as ineffective. Some companies are being accused of greenwashing. Critics are questioning whether the voluntary carbon market works at all.

Here’s what those headlines miss: carbon credits are maturing, not broken. The companies that learn about credits and act on their knowledge earliest will be best positioned for the decade ahead.

Carbon Credits Are Critical. Full Stop.

The scientific consensus is clear: the world cannot stabilize the climate through emissions reductions alone. Even if every country met its Paris Agreement commitments tomorrow, there is already enough CO₂ in the atmosphere to require active removal at massive scale. The Intergovernmental Panel on Climate Change estimates the world must remove between 5 and 10 billion tonnes of CO₂ per year by 2050 to stabilize the climate. Governments and corporations need to mobilize capital at large scale now to achieve that goal.

5–10BTonnes CO₂ / Year by 2050

The IPCC estimate of how much CO₂ the world must physically remove from the atmosphere every year to stabilize the climate — on top of cutting emissions.

Carbon credits are the mechanism that makes large scale removal possible. When a company purchases a high-quality carbon credit, it is not just offsetting an emission on a spreadsheet. It is directing capital toward projects that would not otherwise attract investment and accelerating the development of technologies the world requires. Done right, corporate carbon credit purchasing is one of the most powerful tools available for climate action at the necessary speed and scale.

The question is not whether to participate in carbon markets, but how to do it well. That starts with understanding a distinction that the market itself has only recently made clear.

The Distinction That Changes Everything: Avoidance vs. Removal

Not all carbon credits represent the same thing. To date, the dominant product has been the emissions avoidance credit generated by projects that claim to prevent emissions from occurring. Protecting a forest that might have been cut down. Replacing wood-burning cookstoves with cleaner alternatives. Building renewable energy to displace fossil fuels. These projects represent genuine contributions to climate action, but they share a fundamental limitation: the CO₂ they “avoid” is not removed from the atmosphere.

Avoidance Credit

A claim about what didn’t happen

Represents emissions a project says it prevented from occurring — a counterfactual about a future that may or may not have materialized.

Removal Credit

A verifiable physical fact

Represents CO₂ that has been physically extracted from the atmosphere and stored in trees, soil, water, biochar, or geological formations.

A carbon removal credit is different in kind, not just degree. It represents CO₂ that has been physically extracted from the atmosphere and stored — in trees, soil, water, biochar, or geological formations. The stored carbon is a verifiable, measurable, physical fact — not a claim about a counterfactual future that may or may not have materialized.

This distinction matters because the science of net zero requires it. Stabilizing the climate ultimately requires drawing down the CO₂ that is already in the atmosphere, not just slowing the rate at which we add more. Avoidance credits, even the best ones, cannot accomplish that on their own.

Why the Market Got Here

Avoidance credits came to dominate the market: they were available, affordable, and served a real purpose at a time when the infrastructure for removal did not exist. The voluntary carbon market grew rapidly in the 2010s, and avoidance projects — particularly forest protection and renewable energy — could be deployed quickly at large scale. The standards for differentiating between project types, and for ensuring rigor and additionality, were still evolving.

Some of that early-stage growth produced projects that did not deliver what they promised. Several high-profile REDD+ forest protection projects were found to have dramatically overstated the threat to the forests they claimed to be preserving. Some cookstove projects overstated adoption rates and fuel savings by large multiples, and at least one major project was found to have falsified data entirely. These failures were not inevitable features of the carbon market — they were the predictable growing pains of a new market operating without sufficiently rigorous standards.

Those standards are now being established. The Integrity Council for the Voluntary Carbon Market has disqualified the methodologies behind the most problematic project types. Registries have tightened their requirements. Rating agencies now independently assess individual projects. The market is becoming credible. The lesson from past failures is not that carbon credits don’t work — it’s that quality and project type matter enormously, and that buyers need to understand what they are purchasing.

The Future Is Removal Credits, and the Time to Act Is Now

Whether you are an experienced carbon credit buyer reviewing your existing strategy, or a company just now making your first purchasing decisions, the path forward is the same: focus on removal credits, enter multi-year agreements, and move before prices inevitably rise along with global temperatures.

For experienced buyers

Get ahead of where standards are heading

The credits you bought reflected the best options available at the time. The Science Based Targets initiative’s updated Corporate Net-Zero Standard is unambiguous: avoidance credits will not count toward satisfying residual emissions targets at net zero. Only removal credits will. Companies that continue building avoidance credit portfolios are accumulating instruments that will not fulfill their own pledges. Pivoting now means transitioning on your own terms, at today’s prices, with access to the best projects before they are contracted.

For first-time buyers

You can skip an entire era

You have a significant advantage. You can skip the era of avoidance credits entirely and build a removal-focused portfolio from the start. The integrity failures of the past are well-documented, the distinction between avoidance and removal is now clearly understood, and the projects that deliver genuine removal are the ones attracting the most serious investment and institutional support.

~4%Of credits issued today are removals

Quality removal supply is constrained — biochar alone has accounted for 85–90% of removal deliveries to date. Companies that wait will compete for a limited pool exactly when their net-zero deadlines arrive.

The supply case for acting now is compelling. Removal credits represent only about 4% of all carbon credits currently issued. Biochar has accounted for 85–90% of removal credit deliveries to date. The pipeline of engineered solutions — Direct Air Capture, Enhanced Rock Weathering, Bioenergy with Carbon Capture and Sequestration — is growing but will take years to deliver at scale. Nature-based removal projects, including reforestation and soil carbon, can scale more quickly but require careful selection to ensure durability. In every category, quality supply is constrained. Companies that wait to secure removal credits will compete for a limited pool at a moment when their own net-zero deadlines are imminent. Multi-year purchase agreements, struck now, solve this problem. They lock in supply, encourage developers to build, and enable companies to plan their sustainability commitments with confidence.

You’ll Be in Good Company

The shift toward high-quality removal credits is not a leading-edge bet. It is where the most sophisticated credit buyers have already gone.

Microsoft has been systematically locking in long-term contracts for removal credits across multiple project types, as part of its commitment to become carbon negative by 2030. The Symbiosis Coalition — whose participants include Google, Microsoft, and REI — is actively vetting and contracting with high-quality nature-based removal projects. Frontier Climate, founded by Stripe, Alphabet, Shopify, Meta, and McKinsey, has committed more than $1 billion to purchase permanent carbon removal credits, explicitly aiming to build the supply chain the market will eventually depend on.

These companies are not making a gesture. They are making a market. The supply they are securing now reflects an understanding that the window to act on favorable terms is open today and will not stay open indefinitely.

The Bottom Line

Carbon credits are a critical climate tool that is growing up by developing the standards, rigor, and project quality that the scale of the problem demands. The companies that understand this, and that act on it by shifting purchasing toward high-quality removal credits, will look like the leaders they are. Those who wait will look like they needed to be told twice.

Coming up next: In our next article, we’ll explain how to identify good value in carbon removal credits — what to look for in terms of quality, permanence, and cost, and which project types offer the most compelling combination of all three.