Carbon Business
Carbon credit projects vary widely in design and impact. Each type is based on a recognized methodology that defines how emissions are reduced, removed, or avoided, and how the results are measured and verified. This section introduces common project types to help you understand how carbon credits are generated and what distinguishes one category from another.
With over 300 active methodologies across different registries, carbon projects can be broadly grouped by their underlying mechanism:
- Avoidance/ Reduction vs. Removal, and
- Technology-based Solutions (TBS) vs. Nature-based Solutions (NBS).
Each registry (such as Verra, Gold Standard, or ACR) may apply different methodologies to similar project types. Therefore, while the core concepts are comparable, their implementation, rigor, and co-benefits can vary significantly. Below chart you may find some examples of the project types.
Avoidance / Reduction
Credits generated by reducing or avoiding GHG emissions
Technology-Based Solution
Renewable Energy (Solar, Wind, Hydro)
Renewable energy projects displace fossil fuel-based electricity by generating clean power. Although often excluded from newer voluntary standards due to questions of additionality in mature markets, they still play a role in specific geographies or compliance systems. These are reduction projects and are verified based on energy output and grid emission factors.
Landfill Gas Capture
Landfill gas (LFG) projects capture methane—a potent greenhouse gas—emitted from decomposing organic waste in landfills. The gas is either flared or used for energy, preventing methane from escaping into the atmosphere. Unlike biogas projects, which process controlled organic waste in digesters, LFG projects deal with mixed waste in open environments, where gas generation is less predictable and harder to manage.
Biogas
Biogas projects capture methane from controlled decomposition of organic matter, such as livestock manure or food/agricultural waste, in anaerobic digesters. The captured gas is used for cooking, heating, or electricity generation. These projects reduce both methane emissions and fossil fuel use. Biogas differs from landfill gas in that the input is managed and typically part of a closed-loop system.
Biomass Energy
Biomass energy projects use organic material—such as agricultural residue or sustainably harvested wood—to replace fossil fuel energy. The climate benefit depends on whether the biomass is genuinely renewable and whether emissions from harvesting and combustion are lower than the fossil fuels displaced. These projects are reduction-based, but often scrutinized for land-use impacts and carbon neutrality assumptions.
Clean Cookstoves
Clean cookstove projects reduce emissions by replacing traditional open-fire cooking or inefficient stoves with cleaner, fuel-efficient models. These projects lower biomass consumption, reduce indoor air pollution, and avoid CO₂ and black carbon emissions. They are classified as reduction projects under technology-based solutions. Credits are usually issued based on fuel savings and improved combustion efficiency, verified through field surveys and usage monitoring.
Clean Water / Safe Water Access
These projects reduce emissions by eliminating the need to boil water for disinfection, which often involves burning wood or charcoal. By providing clean water through filtration, chlorination, or UV purification technologies, these projects avoid the emissions that would otherwise result from water boiling. Though less intuitively “climate-focused,” they are considered reduction projects and also improve public health.
Nature-Based Solution
Reducing Emissions from Deforestation and Degradation(REDD+)
REDD+ projects prevent carbon emissions by protecting forests at risk of deforestation or degradation. The avoided emissions are calculated relative to a baseline scenario where forest loss would have occurred. Unlike ARR or IFM, REDD+ focuses on avoiding future emissions rather than enhancing or creating carbon sinks. While REDD+ has faced scrutiny over baseline assumptions, it remains one of the most common and high-volume credit types globally.
Improved Forest Management (IFM)
IFM projects enhance carbon stocks through better forest stewardship practices in existing forests. This may include extending harvest cycles, reducing logging intensity, or preserving high-carbon areas. IFM differs from ARR in that no new forests are planted, and from REDD+ in that deforestation may not be imminent but forest management practices still result in additional carbon retention. Depending on the methodology, IFM can count as removal or reduction/avoidance.
Removal
Credits generated by actively capturing and removing GHG emissions
Technology-Based Solution
Direct Air Capture (DAC)
Direct Air Capture projects remove CO₂ directly from ambient air using chemical processes, typically involving solid or liquid sorbents. The captured CO₂ is then either permanently stored underground (e.g., in geological formations) or used in industrial applications. DAC is among the most precise and measurable forms of technology-based removal, though currently constrained by high cost and energy intensity.
Biochar
Biochar projects create a stable carbon-rich material by pyrolyzing organic biomass (such as crop residues or wood waste) under low-oxygen conditions. When applied to soil, biochar can lock carbon for centuries while improving soil fertility. While the biomass source is nature-based, the pyrolysis and stabilization process is technology-driven, so most standards classify biochar as technology-based removal. Key factors affecting crediting include feedstock sustainability, permanence, and MRV protocols.
Carbon Capture, Utilization and Storage (CCUS)
CCUS projects capture CO₂ emissions from industrial sources (like cement or steel plants) before they are released into the atmosphere. The captured carbon is either stored underground (CCS) or used in products such as building materials (CCU). Only projects with proven permanent storage pathways are eligible for removal-based carbon credits; otherwise, they may count as reduction. CCUS plays a strategic role in decarbonizing hard-to-abate sectors and is typically classified as technology-based.
Nature-Based Solution
Afforestation, Reforestation, and Revegetation (ARR)
ARR projects generate carbon credits by planting trees or restoring vegetation in areas previously deforested or degraded. These activities remove CO₂ from the atmosphere and store it in biomass and soil. ARR is classified as a removal type under nature-based solutions (NBS). Unlike REDD+ or IFM, ARR involves creating new forest cover, not managing or protecting existing ones. Credits are issued based on modeled sequestration over time, and permanence risks such as fire or land-use change are closely monitored.
Soil Organic Carbon (SOC) / Soil Carbon Sequestration
SOC projects store carbon in soil by adopting improved land management practices—such as no-till farming, cover cropping, and rotational grazing—that boost soil organic matter. Under methodologies like Verra’s VM0042, carbon gains must be measured through field-based sampling and verified by third parties, reflecting the sector’s push for scientific rigor and transparency.
Blue Carbon
Blue carbon projects focus on restoring or protecting coastal and marine ecosystems—such as mangroves, seagrasses, and tidal marshes—that naturally absorb and store significant amounts of carbon in biomass and sediment. These projects not only remove CO₂ but also offer strong biodiversity and coastal protection co-benefits. Like ARR, they fall under NBS removal, but are aquatic in nature and often more complex in baseline and permanence modeling.