Carbon Markets 101: A Beginner’s Guide to Turning Emissions into Climate Action1

Imagine Earth is like a big house that all of us live in. Every time we burn fuel to drive a car, cook food, or run factories, we release invisible gases into the air. Some of these gases, like carbon dioxide, act like a thick blanket that traps heat. This blanket is getting thicker and warmer, making the Earth hotter. This is called climate change.

To protect our planet, we need to reduce how much of these gases—called greenhouse gases or GHGs—we release. But what if you can't reduce everything right away? This is where carbon markets come in, like a clever system to help us balance things out.

Let’s start from the beginning.

A carbon credit is like a permit. It allows someone to release one ton of carbon dioxide into the atmosphere. But here’s the catch—it only works if someone else removes or avoids releasing that same amount somewhere else. So, one person pollutes, while another saves the planet. When this balance happens, it's called a carbon offset.

For example, a company in Europe that makes clothing might not be able to stop using fuel-powered machines right away. But they can buy carbon credits from a forest project in Kenya that absorbs carbon dioxide by planting trees. That way, they support global climate action even as they work on becoming cleaner.

Carbon markets are systems where people buy and sell carbon credits. There are two main types. The first is the compliance market, where governments require certain industries to limit their emissions. If companies emit more than allowed, they must buy credits to make up for the extra pollution.

The second is the voluntary carbon market, where companies or individuals choose to offset their emissions because they care about the planet—or their customers do. For instance, a travel company might offset the emissions from flights to show that it's environmentally responsible.

Think of it like this: if your school has a rule that each student must pick up five pieces of trash a week, that’s the compliance market. But if some students pick up extra trash just to help the environment or win an award, that’s the voluntary market.

Credits come from carbon projects that either reduce emissions (like replacing a coal power plant with solar panels), remove carbon (like growing a forest that soaks up carbon from the air), or avoid emissions (like conserving forests to prevent deforestation). These projects are found all over the world—in forests, farms, landfills, and even in technological spaces such as carbon capture and storage systems.

Each project must follow a specific methodology, like a recipe that explains how to measure the amount of carbon saved or removed. Independent experts check the results and make sure the credits are real. Once approved, credits are issued and sold in the market.

To be trustworthy, a carbon credit must meet five big rules. First, it must be real—the carbon savings must actually happen. Second, it must be measurable, so we know exactly how much was saved. Third, it must be additional, meaning it wouldn’t have happened without the project. Fourth, it should be permanent—the carbon shouldn’t go back into the air later. And fifth, it must be verified by an independent third party.

Let’s use an example. If a farmer in Kenya was already planting trees on his land, he can’t suddenly claim credits unless he does something new, like planting extra trees because of carbon finance. Otherwise, the savings aren’t “additional.”

Carbon prices vary. Some credits cost just a few dollars, while others—especially those that also help communities or protect biodiversity—can be worth $15 or more. Technology-based carbon credits have higher prices due to their complex generation with some retailing for about $200. Prices depend on the quality of the credit, the type of project, and the market demand. Below is the state of carbon credit issuance and retirement in 2024 (Sylvera - The State of Carbon Credits 2024 Report):

Africa is rich in land, the sun, and forests—but many communities lack access to clean energy or funding for development. Carbon markets offer a unique opportunity. When African farmers, communities, and entrepreneurs develop carbon-saving projects, they can earn money through credits while improving lives at home.

In Kenya, for example, some farmers engage in Agro-forestry using fruit trees. These sustainable agricultural systems produce create carbon sinks, enhance biodiversity and improve livelihoods. The carbon removal associated with these farming practices can be certified to generate tradable carbon credits.

Different organizations run carbon standards and registries. Verra (with its Verified Carbon Standard) and Gold Standard are two well-known ones in the voluntary market. They provide the rules and tools that project developers use to design, monitor, and register projects. Governments also create systems for compliance markets—like the EU Emissions Trading System or California’s Cap-and-Trade.

Each standard has its own rules, but all are built on strong scientific and ethical principles. Many countries are now starting to develop national carbon frameworks to support domestic and international market participation.

In 2024, carbon markets faced some challenges. Prices fell, trust was shaken, and some companies pulled back. But the long-term outlook remains strong. More countries are setting net-zero goals. New rules under the Paris Agreement—especially Article 6—are helping create a global carbon market. High-integrity credits and nature-based solutions are gaining attention.

In Kenya and across Africa, the momentum is growing. More businesses are exploring carbon projects. Governments are working on policies. And new technologies—like satellite monitoring—are making the market more transparent.

You don’t need to be a big company to participate. Anyone can offset their emissions through certified platforms. If you’re a business leader, you can explore project development or partnerships. If you're a policymaker or researcher, you can help build the systems and rules that ensure fairness and effectiveness.

And if you’re just a curious learner, you can start by understanding your carbon footprint—how much carbon your lifestyle creates—and ways to reduce it. From planting trees to supporting clean energy, every action counts.

Carbon markets might sound complicated at first, but at their core, they’re about fairness and action. Those who pollute must take responsibility. Those who protect nature or innovate for a better future deserve support. By putting a price on carbon, we create value for the invisible work that trees, farmers, inventors, and communities do to cool our planet.

In the years ahead, carbon markets will continue to evolve, face scrutiny, and offer opportunities. Whether you’re in Africa, the Middle East, Asia, America, Europe, or anywhere in between, understanding how this system works is the first step toward becoming a climate-smart citizen of the world.

So next time you hear someone talk about carbon credits or offsets, you can smile and say: “I know what that means—and I know why it matters.”