The carbon credit market is a system of financial incentives and disincentives that reduces greenhouse gas (GHG) emissions around the world. Each credit represents ownership of one metric ton of reduced or avoided GHG emissions, which can be traded, sold or retired. The credits can be used by companies regulated under a cap and trade program to offset their own emissions or by other entities that want to demonstrate carbon neutrality or meet other environmental requirements, such as those laid out in their corporate social responsibility or sustainability policies.

Nations, states, and cities regulate their own carbon credit market at a local level. Many of these are based on the cap and trade model, where companies are given an allowance of emissions and then must purchase credits from other firms to make up for any additional GHGs that they emit beyond their allowance.

International organizations play a crucial role in the global carbon credit market by creating standards and guidelines for carbon reduction projects, providing technical assistance to project developers, and facilitating trading of credits across national boundaries. These organizations can also help establish partnerships and connect potential buyers and sellers in a way that is both transparent and efficient.

At the global level, UNEP and its Copenhagen Climate Centre are involved in capacity building initiatives aimed at developing best practice requirements for independent standards and market stakeholders to increase the integrity of the carbon credit market. These include the Voluntary Carbon Market Integrity Initiative and the Initiative for a Common Market Framework.

The voluntary market is a marketplace where individuals and businesses buy carbon credits to offset their own emissions or demonstrate that they are carbon neutral or are meeting other environmental commitments. Buyers can be motivated by a range of reasons, from a desire to enhance their corporate reputation and enhance their brand to a concern for the environment. In addition, some companies may wish to purchase credits to mitigate against the costs of a new regulation before it comes into force.

In the voluntary market, there are a wide range of players in the value chain, from brokers who match supply and demand to project developers, who develop and manage carbon reduction projects. There are also retail traders who bundle a portfolio of credits and sell them to end buyers, often for a small commission. Finally, there are exchanges such as Xpansiv CBL in the United States and ACX in Singapore, which provide a platform for trading.

It is important that the people who participate in carbon markets can be confident that each credit they buy or sell truly represents a tonne of reduced or avoided emissions. To achieve this, a number of initiatives have been established to verify the quality of carbon credits in the marketplace, including the core carbon principle labeling and the carbon credit stewardship initiative. In addition, there are a number of standard products that have been developed by exchanges to simplify and speed up the trade process.