Are Carbon Credits Becoming More Acceptable?

Carbon credits remain a subject of debate. Concerns over their effectiveness and transparency have spurred skepticism that they might be exploited for corporate greenwashing. This has resulted in many companies avoiding involvement and the carbon markets largely stagnating.

However, the World Resources Institute underscores that carbon removal is essential to offset residual emissions which cannot be eliminated on the path to net zero. Without sufficient investment, carbon credits may fail to scale and fully serve as a robust instrument to protect the planet.

A report released early in 2025 by MSCI forecasts that the "frozen" carbon market is poised to thaw. With corporations increasingly committing to climate goals and market mechanisms evolving, MSCI anticipates a market revival by 2030.

"Carbon credits have come a long way since their inception in the late 1980s. From early offset programs to today's dynamic voluntary markets, the path has been shaped by pivotal milestones like the Kyoto Protocol, the EU Emissions Trading Scheme and the Paris Agreement," said Jeremy Davis, Executive Director at MSCI. 

The growing participation and discourse around carbon credits by major firms like SAP, Microsoft and Google suggest that carbon markets are on the brink of significant growth.

Read the full story in the first September 2025 edition of Sustainability Magazine.

What are carbon credits?

Carbon credits vary widely according to factors like market origin, mechanism and approach.

Some credits are used for compliance to satisfy legally mandated emissions caps, such as under the European Union Emissions Trading System (EU ETS). Others are purchased voluntarily by organisations aiming to offset emissions beyond regulatory requirements.

There are three primary types of carbon credits based on their emissions impact:

• Carbon avoidance credits are generated by projects that prevent emissions from occurring in the first place, such as renewable energy installations replacing fossil fuels or forest conservation efforts

• Carbon reduction credits reflect emissions decreased compared to a historical baseline, for example through industrial efficiency improvements

• Carbon removal credits involve physically extracting carbon dioxide or other greenhouse gases from the atmosphere, through methods like reforestation or enhanced weathering

Credits can also be categorised by their source:

• Nature-based credits include forestry, land use projects, regenerative agriculture and mangrove protection

• Technology-based credits encompass carbon capture and storage, direct air capture, biochar and methane capture

Lastly, carbon credits are distinguished by timing:

• Ex-ante credits represent projected future emissions reductions

• Ex-post credits are issued after emissions reductions have been independently verified

Who provides carbon credits?

The carbon market is diverse, reflecting the varied needs of different purposes, regions and regulatory frameworks.

Consequently, the range of carbon credit providers has expanded to meet these unique business demands, with specialised marketplaces catering to distinct requirements.

Climeworks develops “best-in-class” carbon removal strategies featuring its proprietary Direct Air Capture (DAC) technology, partnering with companies like the LEGO Group, H&M Group, Morgan Stanley and SAP. Every carbon removal solution, supplier and project it engages with has been verified or certified by internationally recognised standards.

3Degrees curates portfolios of independently verified credits aligned with particular goals and purchasing criteria, overseeing the monitoring, reporting and verification of managed projects while conducting thorough due diligence on partner initiatives.

South Pole offers a comprehensive array of carbon credits spanning nature-based, technology-based, avoidance and removal types. The company boasts one of the world’s largest portfolios of climate action projects designed to make an “immediate, cost-effective, strategy-aligned impact on climate change”.

Agreena provides verified nature-based carbon credits, strictly verified by third parties and adhering closely to international standards. Managing carbon stored across more than 4.5 million hectares, it operates Europe’s largest soil carbon program and supports 2,300 farmers.

Watershed’s marketplace features climate projects evaluated against six critical criteria, additionality, verification, permanence, leakage, catalytic nature, and co-benefits, facilitating the creation of diverse portfolios with centralised purchase records. 

Carbon credits standards and verification

Voluntary carbon market standards (VCMS) establish the rules, requirements and methodologies that govern the development, certification and issuance of carbon credits within the voluntary carbon market.

These standards are essential for ensuring that carbon credits represent real, measurable, additional and permanent reductions or removals of greenhouse gases.

A wide array of standards and credit issuers exists, each with different focuses such as nature-based projects or technology-based initiatives.

The ICROA Code of Best Practice offers an overarching framework for organisations providing carbon management and compensation services rather than directly issuing credits. It sets minimum requirements for greenhouse gas footprinting and advisory services, the transacting and retiring of carbon credits and ensures credit trustworthiness through annual third-party compliance audits.

This Code helps maintain integrity and transparency across voluntary carbon market activities.

Verra’s Verified Carbon Standard (VCS) is among the most widely adopted standards, providing detailed methodologies covering various project categories including renewable energy, forestry and waste management.

It mandates independent third-party audits for all projects and governs the processes of project validation, monitoring and verification while operating a public registry to maintain transparency.

The Puro Standard specialises in certifying carbon removal projects such as biochar, bioenergy with carbon capture and storage and other technology-driven removals.

It applies rigorous requirements, methodologies and independent verification processes to ensure project quality.

Isometric, a newer standard focusing exclusively on technological carbon removal, emphasises scientific rigor and transparency by verifying projects through independent audits backed by detailed methodologies.

SAP’s collaboration with Climeworks

Climeworks and SAP have forged a multi-million-euro partnership to secure 33,500 tonnes of carbon removal credits, extending through 2034.

Under this agreement, Climeworks will remove CO₂ for SAP through a tailored portfolio that includes Direct Air Capture (DAC), biochar and enhanced rock weathering, specifically aligned with SAP’s business needs. 

"Investing in quality carbon removals addresses emissions we can't eliminate directly,” says Sophia Mendelsohn, Chief Sustainability and Commercial Officer at SAP. “Our Climeworks partnership secures high-integrity capacity at preferred rates while protecting against price volatility. This investment also strengthens SAP economically - we can now develop new products that meet evolving customer, partner and regulatory expectations.”

Integral to the collaboration, Climeworks has adopted SAP’s S/4HANA Public Cloud via the GROW with SAP programme alongside SAP LeanIX, which enhances operational efficiency, compliance enforcement and financial management.

Climeworks plans to deepen its use of SAP’s sustainability tools, including the SAP Sustainability Control Tower.

Christoph Gebald, Co-Founder and Co-CEO of Climeworks, says: “Climeworks and SAP share the belief that sustainability is a core element of business strategy. Through this partnership, we are not only advancing carbon removal as a key solution to mitigate climate change-induced business risks but are also embedding it into enterprise technology, making it easily actionable for businesses worldwide. Thereby, companies can build resilience into their operations – turning the shift toward sustainability into an economic opportunity, not a trade-off.”

Microsoft’s plan for carbon credits

The growth of energy-intensive AI and cloud computing has challenged Microsoft’s climate commitments. While the company achieved a 30% reduction in Scope 1 and 2 emissions from its 2020 baseline by 2024, its total emissions increased by 23.4%. To address this rise, Microsoft is deploying a variety of strategies, including the use of carbon credits.

In the Southern United States, Microsoft has secured a long-term agreement with Chestnut Carbon to acquire more than six million tonnes of carbon credits over 25 years. This ambitious project involves planting more than 35 million trees.

Brian Marrs, Senior Director of Energy and Carbon Removal at Microsoft, said: “Microsoft is thrilled to announce that it has entered into a new long-term offtake agreement with Chestnut Carbon, a Kimmeridge company, to purchase high-quality, carbon removal from its afforestation, reforestation, and restoration projects across the southern United States.

“This is one of – if not the – single largest voluntary corporate investments in conservation forestry in the United States. It will deliver 7 million tons of carbon removal over a 25-year period, restore roughly 60,000 acres of land and plant over 35 million native, biodiverse hardwood and softwood trees.”

How Google uses carbon removals

Energy-intensive technologies have contributed to a significant increase in Google’s carbon footprint. Since 2019, its emissions have risen by 51%, partly due to a surge in electricity consumption driven by its expanding artificial intelligence (AI) and cloud operations.

In 2024, the company contracted more than US$100 million in carbon removal credits, leveraging a mix of independent purchases and agreements through the consortium Frontier to accelerate carbon removal solutions.

Google’s investments are supporting diverse advancements in carbon removal. The restoration of carbon sinks, with a strong emphasis on precise measurement, is bolstered by Google’s role as a co-founder of Symbiosis, an advanced market commitment that establishes criteria for forestry projects and aggregates corporate demand to help these initiatives scale.

Additionally, the company supports innovators like Terradot and other providers specialising in enhanced rock weathering to advance deployment and improve measurement accuracy.

These efforts form part of Google’s broader strategy to mitigate its rising emissions while fostering scalable, high-impact carbon removal technologies.

Randy Spock, Carbon Credits and Removals Lead at Google, wrote in a blog post: “We’re encouraged by our progress, but the journey to catalyse carbon removal is just beginning. In the year ahead, we will continue to expand our support for carbon removal as part of our ongoing effort to find the solutions the world needs and maximise their impact on the planet. We’ll also remain open to other approaches that can help drive rapid, near-term action to mitigate climate change.

“And since Google can’t achieve this alone, we’ll continue to help other players, from companies to academics, work collectively to accelerate the solutions the world needs now and in the future.”