Carbon credits and carbon allowances: the difference
People use "carbon credit" for two quite different things. A carbon allowance is a permit created by a government emissions trading scheme. A voluntary carbon credit is a certificate issued by an independent standard for a project that cuts or removes emissions. Both are usually counted in tonnes of CO2 equivalent, but they are not interchangeable.
| Compliance allowances | Voluntary carbon credits | |
|---|---|---|
| Examples | UK Allowances (UKAs), EU Allowances (EUAs) | Verra VCUs, Gold Standard VERs, Woodland Carbon Units, Peatland Carbon Units |
| Created by | Governments, under a legal cap on emissions | Independent standards, for projects that reduce or remove emissions |
| Who needs them | Businesses covered by the scheme, which must surrender one allowance per tonne emitted | Bought by choice, except where a scheme such as CORSIA for airlines requires eligible credits |
| What one unit means | The right to emit one tonne of CO2 equivalent | Usually one tonne of CO2 equivalent reduced or removed |
| Price | Public: official monthly averages and auction-based prices | No official benchmark; agreed between buyer and seller |
| Valid for UK ETS compliance | UK Allowances only | No |
They are also held in different places. UK Allowances sit in the UK Emissions Trading Registry. Voluntary credits are recorded on registries run by each standard, such as the Verra Registry, the Gold Standard Impact Registry and the UK Land Carbon Registry.
Carbon allowances: UKAs and EUAs
The UK Emissions Trading Scheme (UK ETS) is a cap and trade scheme. The UK ETS Authority sets a cap on emissions from the covered sectors and divides it into allowances, each equivalent to one tonne of CO2 equivalent. Businesses in power, heavy industry, aviation and domestic maritime must surrender one allowance for every tonne they emit, by 30 April each year.
Allowances are auctioned or given free to some businesses, and can then be traded. The UK ETS Authority's official monthly average was £63.94 in October 2026, and no auction can clear below the auction reserve price, which is £28 and rises to £29.01 on 1 January 2027. See today's UK carbon price for the latest figure.
The EU Emissions Trading System uses the same unit. The EU ETS Directive defines an allowance as "an allowance to emit one tonne of carbon dioxide equivalent during a specified period". The European Commission's official CBAM certificate price, which is based on EU ETS auctions, was €82.32 for the third quarter of 2026. See the EU carbon price page for the latest figures.
The two schemes are separate and not yet linked, so each has its own price. The UK and EU are negotiating a link, which our UK-EU ETS linking guide follows.
The voluntary carbon market: standards and registries
In the voluntary carbon market, organisations buy credits by choice, often to support emissions cuts or removals outside their own operations or to back a climate claim. Each credit is issued by a crediting programme, usually called a standard. The standard sets the rules, approves the methods for measuring a project's impact and requires independent checks. Credits are then recorded on the standard's registry with unique serial numbers.
| Standard | Unit | Registry | What it covers |
|---|---|---|---|
| Verified Carbon Standard (Verra) | Verified Carbon Unit (VCU): one tonne of CO2e reduced or removed | Verra Registry | Projects worldwide. Verra describes it as the world's most widely used greenhouse gas crediting programme |
| Gold Standard | Verified Emission Reduction (VER) units | Gold Standard Impact Registry | Climate and sustainable development projects. Run by a not-for-profit based in Geneva |
| UK Woodland Carbon Code | Woodland Carbon Unit (verified) and Pending Issuance Unit (a promise of a future unit) | UK Land Carbon Registry | New woodland in the UK. Delivered by Scottish Forestry on behalf of the UK, Scottish, Welsh and Northern Ireland governments |
| UK Peatland Code | Peatland Carbon Unit and Pending Issuance Unit | UK Land Carbon Registry | Peatland restoration in the UK. Launched in 2015 and managed by the IUCN UK Peatland Programme |
The UK codes offer two kinds of unit. A Pending Issuance Unit is a promise of a future unit based on predicted removals or, for peatland, predicted emission savings. The Woodland Carbon Code says it is not guaranteed and cannot be used to report against UK-based emissions. A Woodland Carbon Unit is a tonne of CO2e already removed from the atmosphere, independently verified and guaranteed.
Woodland projects are verified at least every ten years, and each contributes 20% of its verified units to a buffer that covers any project that loses verified credits. The code also says its units cannot be used to compensate for overseas emissions or for emissions from international aviation or shipping.
Why voluntary credits cannot be used for UK ETS compliance
UK ETS operators must surrender UK Allowances to cover their emissions. In its 2024 consultation on greenhouse gas removals, the UK ETS Authority said it "is not considering the inclusion of avoided emissions or offsets in the UK ETS". The Woodland Carbon Code likewise says Woodland Carbon Units cannot currently be used in compliance schemes such as the UK ETS.
The one planned change concerns greenhouse gas removals. In July 2025 the Authority said it will aim to legislate to bring removals into the UK ETS by the end of 2028, aiming for the system to be operational by the end of 2029. At first only removals that take place in the UK will qualify. Allowances will be awarded only after the removal has been verified, and projects must show carbon will be stored for at least 200 years.
Woodland is still undecided. The Authority's policy overview, updated on 7 September 2026, says new evidence on woodland will inform a future decision on whether to include it.
The EU takes a similar line. EU ETS operators could use some international credits until 2020, but the European Commission says it "does not currently envisage continuing the use of international credits for EU ETS compliance after 2020".
Carbon credit prices: what affects them
Compliance prices are public. The UK ETS Authority publishes an official monthly average UK Allowance price, and the European Commission publishes an official CBAM certificate price based on EU ETS auctions. Voluntary credits, often called carbon offsets, have no equivalent official benchmark. Carbon offset prices are agreed between buyers and sellers and vary widely by type of credit.
- Project type. Removing carbon from the air is valued differently from avoiding emissions. In 2024 the UK ETS Authority noted that voluntary market buyers were willing to pay "significantly more than the UK ETS carbon price" for engineered carbon removals.
- Verification status. A verified unit has already been delivered; a pending unit is a promise. The Woodland Carbon Code expects verified Woodland Carbon Units to cost more than Pending Issuance Units.
- Vintage and serial number. For UK woodland units, the vintage is the period in which pending units are due to be delivered and verified, for example 2020 to 2030. Lower serial numbers in a vintage are more secure, because undelivered units are cancelled from the highest number first.
- Costs and wider benefits. The Woodland Carbon Code says prices depend on the cost of creating and managing the woodland and the range of benefits it provides, as well as vintage and serial number.
- Quality labels. Credits issued under ICVCM-approved programmes and methods can carry a CCP label, and airlines can only use CORSIA Eligible Emissions Units for CORSIA. Both narrow the pool of credits that qualify.
For UK nature credits, the Woodland Carbon Code publishes average prices for woodland and peatland units. They come from prices that sellers report voluntarily through Ecosystem Marketplace's Global Carbon Markets Hub, so the code says they are not a market-wide estimate.
| Year | Woodland Carbon Code | Peatland Code |
|---|---|---|
| 2020 | £11.01 | Not enough data |
| 2021 | £15.41 | Not enough data |
| 2022 | £19.27 | £23.95 |
| 2023 | £24.24 | £26.00 |
| 2024 | £26.85 | £25.04 |
| 2025 | £28.32 | £39.57 |
Treat these as a guide only. The 2025 woodland figure is based on three respondents covering 43 projects, and the code says the 2025 peatland average came from a small sample and was pushed up by three large transactions at well above typical prices. The code assumes at least 99% of reported sales were Pending Issuance Units, so there is not yet enough data for a verified unit price.
Allowance and offset prices measure different things
A UK Allowance is a legal permit to emit, priced in a capped market. A voluntary credit is a claim about one project's impact, and its value depends on its quality and how the buyer plans to use it. Comparing the two prices directly can mislead.
Quality labels: the ICVCM Core Carbon Principles
The Integrity Council for the Voluntary Carbon Market (ICVCM) is an independent non-profit governance body. Its 10 Core Carbon Principles (CCPs) cover programme governance, tracking on a registry, transparency, independent validation and verification, additionality, permanence, robust quantification, no double counting, sustainable development benefits and safeguards, and contribution to the net zero transition.
A credit can carry the CCP label only if it was issued under a CCP-Eligible programme using a CCP-Approved methodology. In the ICVCM status table last updated on 4 August 2026, 13 programmes were CCP-Eligible, including Verra's Verified Carbon Standard and Gold Standard. The Woodland Carbon Code was listed as an applicant, not yet CCP-Eligible.
The label is a check on methods, not on each project. The UK government has noted that ICVCM does not assess how well individual projects are implemented, and sees a role for carbon credit ratings agencies at project level.
The UK Government's position on voluntary carbon markets
On 15 November 2024 the government published six principles for voluntary carbon and nature market integrity:
- Use credits in addition to ambitious action within your own value chain.
- Use high integrity credits.
- Measure and disclose the planned use of credits as part of sustainability reporting.
- Plan ahead, using best practice guidance for transition plans.
- Make accurate green claims using appropriate terminology.
- Co-operate with others to support the growth of high integrity markets.
The Department for Energy Security and Net Zero then consulted on how to put the principles into practice, from 17 April to 10 July 2025. It said the government was "minded to endorse" the ICVCM Core Carbon Principles and Assessment Framework as a minimum basis for high-integrity credits. It also proposed recognising the Voluntary Carbon Markets Integrity Initiative (VCMI) Claims Code as international best practice for corporate claims.
A summary of the 200 responses was published on 26 March 2026. The government said its formal response would follow in summer 2026, but it had not appeared on the consultation page when we checked on 10 October 2026. The proposals are not legal requirements.
Two other points matter for UK buyers. The government provides the UK Land Carbon Registry for woodland and peatland units. And the Competition and Markets Authority's guidance on environmental claims says a business that offsets should give information about the scheme it uses, which should be based on recognised standards and measurements capable of objective verification.
CORSIA: carbon offsetting for international flights
The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is the International Civil Aviation Organization's (ICAO) global market-based measure for international aviation emissions. ICAO describes it as the first global market-based scheme that applies to a sector. Airlines offset the growth in emissions from international flights between participating states above a baseline, which from 2024 is 85% of 2019 emissions.
| Phase | Years | Which states take part |
|---|---|---|
| Pilot phase | 2021 to 2023 | States that volunteered |
| First phase | 2024 to 2026 | States that volunteered |
| Second phase | 2027 to 2035 | All states above ICAO's aviation activity thresholds, except least developed countries, small island developing states and landlocked developing countries unless they volunteer |
To comply, an airline cancels CORSIA Eligible Emissions Units equal to its offsetting requirement. Only programmes approved by the ICAO Council can supply these units. The activity must have started its first crediting period in 2016 or later, and units from 2021 vintages onward have extra requirements for attestations from the host country.
In the UK, CORSIA applies to aeroplane operators whose international flights emit more than 10,000 tonnes of CO2 a year, using aeroplanes over 5,700kg maximum take-off mass. The UK has taken part since the pilot phase began in 2021. The Air Navigation (Carbon Offsetting and Reduction Scheme for International Aviation) Order 2021 sets the monitoring, reporting and verification rules, and a further order will set out offsetting obligations.
The Department for Transport consulted on that draft legislation from December 2024 to February 2025, including how CORSIA should work alongside the UK ETS on flights to the European Economic Area and Switzerland. The UK ETS policy overview, updated on 7 September 2026, says a response will follow in due course.
How to check a carbon offset
Whether you are buying credits or judging a supplier's claim, the registry record is the best evidence. Credits from the standards above carry unique serial numbers and can be looked up on public registries.
- Ask for the registry name, the project ID and the serial numbers of the credits.
- Find the project on the public registry, such as the Verra Registry, the Gold Standard Impact Registry or the UK Land Carbon Registry. Check the project type, location, standard and vintage.
- Check the credits have been retired. Retirement takes a credit out of circulation so it cannot be used again. For a claim, the retirement should be in your name or the claimant's, ideally with a note saying what it covers.
- For UK woodland units, check whether they are Pending Issuance Units or verified Woodland Carbon Units. Only verified units can be used against emissions.
- Check any quality label, such as a CCP label on the registry record, or CORSIA eligibility if the credit is meant for airline compliance.
- Check the claim matches the evidence. The CMA expects offsetting claims to name the scheme used, and the government's principles say credits should come on top of cutting your own emissions, not instead of it.
Allowances are checked differently
UK Allowances are not retired on a voluntary registry. They are held in the UK Emissions Trading Registry, whose public reports include a compliance report of each operator's emissions and surrendered allowances. Our UK ETS guide explains how compliance works.
Questions
What is a carbon credit?
A certificate representing a reduction or removal of greenhouse gases, usually one tonne of CO2 equivalent, issued by a crediting programme such as Verra's Verified Carbon Standard, Gold Standard or the UK Woodland Carbon Code. People also use the term for government carbon allowances, which are permits to emit.
How much is a carbon credit worth?
It depends on the type. A UK Allowance averaged £63.94 in October 2026 and the EU CBAM certificate price for Q3 2026 was €82.32. Voluntary credits have no official price; the Woodland Carbon Code reports an average of £28.32 for a UK woodland Pending Issuance Unit in 2025, based on voluntary reporting by sellers.
What is the difference between a carbon credit and a carbon allowance?
An allowance is a permit to emit one tonne of CO2 equivalent, created by a government trading scheme with a legal cap. A voluntary carbon credit represents emissions reduced or removed by a project, and is bought by choice rather than by law.
Can carbon credits be used in the UK ETS?
No. UK ETS operators must surrender UK Allowances, and the UK ETS Authority is not considering offsets or avoided emissions. It does plan to admit verified UK greenhouse gas removals, aiming for the system to be operational by the end of 2029.
What is the voluntary carbon market?
The market in carbon credits bought by choice rather than to meet a legal obligation, often to support climate projects or back climate claims. Credits are issued by independent standards and tracked on their registries.
Are carbon offsets regulated in the UK?
There is no UK law setting minimum quality rules for voluntary credits. In 2025 the government consulted on options, including minimum buyer requirements through guidance or legislation, and its formal response was still awaited on 10 October 2026. Offsetting claims must still follow consumer protection law, and the CMA's guidance says businesses should explain which scheme they use.
What is CORSIA?
ICAO's scheme for offsetting the growth in emissions from international flights between participating states, above a baseline that since 2024 has been 85% of 2019 levels. Airlines cancel CORSIA Eligible Emissions Units. The first phase runs from 2024 to 2026, and the second phase, which covers states above ICAO's aviation activity thresholds unless they are exempted, runs from 2027 to 2035.
How can I check if a carbon offset is genuine?
Ask for the registry and serial numbers, find the credits on the public registry and check they have been retired in your name or the claimant's. Then check the project type, vintage and any CCP or CORSIA label.
What is a Woodland Carbon Unit?
A tonne of CO2 equivalent removed from the atmosphere by a Woodland Carbon Code project, independently verified and guaranteed. Pending Issuance Units are promises of future units and cannot be used to report against UK-based emissions.
Sources
- UK ETS Authority: UK ETS policy overview (updated 7 September 2026) (checked 10 October 2026)
- UK ETS Authority: CCM trigger prices and average monthly prices, full table (updated 10 November 2026) (checked 11 November 2026)
- UK ETS Authority: Taking part in the UK ETS markets (auction reserve price, updated 10 November 2026) (checked 11 November 2026)
- EUR-Lex: Directive 2003/87/EC (EU ETS Directive), consolidated text, Article 3(a) (checked 10 October 2026)
- European Commission: Price of CBAM certificates (checked 10 October 2026)
- European Commission: Use of international credits in the EU ETS (checked 10 October 2026)
- UK ETS Authority: Integrating greenhouse gas removals in the UK ETS, consultation (May 2024), pages 25 and 42 (checked 10 October 2026)
- UK ETS Authority: Integrating greenhouse gas removals in the UK ETS, Authority response (21 July 2025) (checked 10 October 2026)
- Verra: Verified Carbon Standard (checked 10 October 2026)
- Verra: VCS Program details (checked 10 October 2026)
- Gold Standard: Impact Registry (checked 10 October 2026)
- Gold Standard: About us (checked 10 October 2026)
- Woodland Carbon Code: home page (checked 10 October 2026)
- Woodland Carbon Code: What you can buy (checked 10 October 2026)
- Woodland Carbon Code: How to buy and use units (checked 10 October 2026)
- Woodland Carbon Code: UK carbon prices (2020 to 2025 data) (checked 10 October 2026)
- IUCN UK Peatland Programme: The Peatland Code (checked 10 October 2026)
- IUCN UK Peatland Programme: Buying and selling Peatland Code credits (checked 10 October 2026)
- ICVCM: The Core Carbon Principles (checked 10 October 2026)
- ICVCM: Assessment status (programme table last updated 4 August 2026) (checked 10 October 2026)
- ICVCM: About the Integrity Council (checked 10 October 2026)
- DESNZ: Principles for voluntary carbon and nature market integrity (15 November 2024) (checked 10 October 2026)
- DESNZ: Voluntary carbon and nature markets: raising integrity, consultation page (updated 26 March 2026) (checked 10 October 2026)
- DESNZ: Voluntary carbon and nature markets: raising integrity, consultation document (17 April 2025) (checked 10 October 2026)
- DESNZ: Voluntary carbon and nature markets: raising integrity, summary of responses (26 March 2026) (checked 10 October 2026)
- Competition and Markets Authority: Making environmental claims on goods and services (checked 10 October 2026)
- ICAO: Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) (checked 10 October 2026)
- ICAO: Assembly Resolution A42-22 on CORSIA (checked 10 October 2026)
- ICAO: CORSIA Eligible Emissions Units (checked 10 October 2026)
- ICAO: CORSIA Eligible Emissions Units, informal summary table (April 2026) (checked 10 October 2026)
- Environment Agency: CORSIA, how to comply (checked 10 October 2026)
- Department for Transport: Implementing CORSIA, consultation (December 2024) (checked 10 October 2026)
- legislation.gov.uk: The Air Navigation (Carbon Offsetting and Reduction Scheme for International Aviation) Order 2021 (SI 2021/534) (checked 10 October 2026)
- UK Emissions Trading Registry: UK ETS public reports (checked 10 October 2026)
Get updates when the rules or prices change
One email when a new official figure or rule change is published.