10 Carbon Credit Misconceptions: What UK Businesses Need to Know

This is probably the most common criticism of carbon credits, and it is not difficult to understand why. Some businesses have used carbon credits to make broad claims such as “carbon neutral”, “climate positive” or “net zero” without clearly explaining what they have actually done to reduce their own emissions. Others have promoted offsetting as if it cancels out the environmental impact of high-carbon products, flights or services.

That kind of messaging can be misleading. In the UK, this is exactly why regulators have taken a stronger interest in environmental claims. The CMA Green Claims Code sets out six principles businesses should follow when making green claims. Claims must be truthful and accurate, clear and unambiguous, must not omit important information, must make fair comparisons, must consider the full life cycle of a product or service, and must be substantiated.

The Advertising Standards Authority has also issued guidance on carbon neutral and net zero claims in advertising. The ASA expects advertisers to avoid misleading consumers, especially where claims depend heavily on offsetting or future plans. So yes, carbon credits can contribute to greenwashing when they are used badly. But it is too simplistic to say that carbon credits are always greenwashing. A company that measures its emissions, reduces them year on year, reports transparently, and then uses high-quality credits to support additional climate action is not doing the same thing as a company that simply buys cheap offsets and makes vague claims.

The distinction matters.

A poor claim might say:

“We are carbon neutral because we offset all our emissions.”

A better claim would say:

“We measure our operational emissions, are reducing them through energy efficiency and supplier changes, and have purchased independently verified carbon credits to support climate action beyond our own value chain. These credits do not replace our emissions reduction plan.”

The second version is more honest, more transparent and much more aligned with the direction of UK guidance.

This is a powerful objection because it gets to the heart of public concern. People worry that carbon credits allow companies to continue business as usual while paying someone else to clean up the damage. In other words, they fear carbon credits become a moral escape route. That concern is valid.

Carbon credits should never be treated as a right to pollute. A tonne of CO₂ emitted into the atmosphere still matters, even if a company has purchased a credit elsewhere. The most credible climate strategy is always to cut greenhouse gas emissions directly first, and purchasing credits should never replace that.

For a UK business, this might mean:

• switching to renewable electricity

• improving energy efficiency in offices, warehouses or venues

• electrifying company vehicles where possible

• reducing business travel

• choosing lower-carbon suppliers

• reducing waste

• improving product design

• measuring Scope 1, Scope 2 and relevant Scope 3 emissions

Only after that should carbon credits come into the picture, with organizations prioritizing internal reductions over carbon credits in their climate strategies. This hierarchy is important. The UK Government’s voluntary carbon and nature market principles explicitly say credits should be used in addition to ambitious action within value chains. That means businesses should not use carbon credits as a substitute for doing the hard work internally. A helpful way to explain this is:

Carbon credits should not be a permission slip. They should be a contribution.

They are most credible when used for residual emissions that are currently difficult to eliminate, or when used to finance climate action beyond a company’s direct operations. For example, a UK professional services firm might reduce its office energy use, switch to renewable electricity, improve procurement and limit business travel. It may still have residual emissions from software, events, supply chains or unavoidable travel. Supporting high-quality carbon projects can be part of its wider climate contribution, but high-quality carbon credits complement direct emissions reductions rather than replace them.

Some carbon credits have failed to deliver the climate benefit they promised. That is a real problem. Issues such as weak additionality, poor measurement, over-crediting, lack of permanence and double counting have damaged trust in the market. Only a small fraction of carbon offset projects deliver the claimed emission reductions, which is why careful screening matters. But saying “carbon credits are useless” goes too far.

A carbon credit is not automatically good or bad, and many fail the test of additionality and misrepresent their claims. Its value depends on whether the underlying work is additional, verifiable, immediate, and durable, as well as on the methodology, the verification and the honesty of the claim made by the buyer. High-quality carbon credits can support projects such as, with credits generated from diverse sources including Direct Air Capture and renewable energy projects:

• methane capture from landfill or agriculture

• peatland restoration

• woodland creation

• clean cooking projects

• renewable energy in markets where carbon finance is still genuinely additional

• biochar

• direct air capture

• enhanced weathering

• carbon capture and storage

• protection and restoration of carbon-rich ecosystems

In the UK, one useful example is the Woodland Carbon Code, described as the UK’s government-backed standard for woodland creation projects that generate high-integrity carbon credits. Woodland Carbon Code projects are designed to create new woodland and generate verified carbon units over time.

Another UK-relevant area is peatland restoration. Peatlands are hugely important carbon stores. Damaged peatlands can release greenhouse gases, while restoration can help reduce emissions and support biodiversity. The IUCN UK Peatland Programme provides useful background on why peatlands matter, and the Peatland Code provides a voluntary certification standard for UK peatland restoration projects.

The key point is this: Bad credits are a problem. Good credits can be part of the solution when they come from high quality projects that can demonstrate additionality.

The challenge for businesses is to know the difference.

This misconception contains a grain of truth but is not reliable as a general rule. Some high-emitting companies do buy carbon credits. Airlines, energy companies, manufacturers and global logistics businesses often operate in sectors where emissions are difficult to eliminate quickly. It is understandable that people view their use of carbon credits with scepticism.

But buying carbon credits does not automatically mean a company pollutes more than others. Many smaller businesses, charities, event organisers, consultancies, SaaS companies, hospitality businesses and travel brands also buy carbon credits as part of a wider climate strategy. The real test is not whether a company buys credits. The real test is what else it is doing.

A responsible company should be able to answer questions such as:

• Has it measured its emissions properly?

• Does it report Scope 1 and Scope 2 emissions?

• Is it addressing material Scope 3 emissions?

• Does it have a credible emissions reduction plan?

• Are its targets short-term as well as long-term?

• Are the credits independently verified?

• Are the credits retired, so they cannot be claimed again?

• Does the company avoid exaggerated claims?

For example, imagine two UK businesses. Business A buys carbon credits and says it is “saving the planet”, but it has no emissions reduction plan, no published data and no clear explanation of what the credits fund. Business B buys carbon credits, but also publishes its emissions, reduces energy use, works with lower-carbon suppliers, switches to renewable electricity, reduces travel and explains exactly what projects it supports. Those two businesses should not be judged in the same way. Carbon credits are not the problem by themselves. The problem is when companies use them to hide inaction.

This is one of the more sophisticated criticisms. Some people argue that carbon credits are too complex, too expensive to administer, too dependent on consultants and verification bodies, and too uncertain in their outcomes. In some cases, they are right. Carbon markets can be inefficient. Project development can be slow. Verification can be costly. Buyers can find it difficult to compare credits. Prices vary widely. Some projects may receive less funding than expected after intermediaries and transaction costs are taken into account. But again, the answer is not as simple as “carbon credits are inefficient”. Despite its flaws, the carbon market still directs billions of dollars into sustainable initiatives.

The purpose of voluntary carbon markets is to direct private finance towards activities that reduce, avoid or remove emissions. In some cases, that finance can help finance projects that might otherwise struggle to secure funding and support a more sustainable future. The Climate Change Committee has described voluntary carbon markets and offsetting as presenting both risks and opportunities for progress to net zero in the UK and globally. That balanced view is important. Carbon markets are not magic, but they can mobilise finance. In 2024, the carbon offset market traded around 1.5 billion euros, representing roughly 300 million tons of carbon.

UK nature-based schemes are a good example. Woodland creation and peatland restoration require upfront investment, long time horizons and careful monitoring. Carbon finance can give landowners and project developers another route to funding environmental restoration. The Woodland Carbon Code explains that buyers should start by measuring and reducing their emissions before buying and using units. This is important because it frames carbon credits as part of a responsible process, not as a quick purchase at the end. Carbon credits may not be the perfect financing tool. But in a world where climate finance remains far below what is needed, dismissing them entirely would be unwise.

A more accurate statement would be: Carbon credits are not always an efficient financing tool, but well-designed carbon markets can help channel private money into climate projects that need long-term support.

Trust is the central issue in the voluntary carbon market. The carbon market often lacks transparency and independent verification, which is why scrutiny is necessary.

Buyers want to know whether the credit represents a real climate benefit and leads to actual emission reductions. Critics want to know whether emissions reductions would have happened anyway. Communities want to know whether projects respect local rights. Regulators want to know whether companies are making honest claims. High-quality projects use robust methodologies and, in some cases, continuous monitoring to show whether they are making a meaningful difference.

The main integrity questions include:

• Additionality: Would the project have happened without carbon finance?

• Permanence: Will the carbon benefit last?

• Leakage: Does the project simply shift emissions elsewhere?

• Measurement: Is the carbon impact calculated accurately?

• Verification: Has an independent body assessed the project through a credible verification process central to trust?

• Double counting: Has the same credit been claimed more than once?

• Retirement: Has the credit been permanently removed from circulation after use?

• Social impact: Are local communities treated fairly?

This is why initiatives such as the Integrity Council for the Voluntary Carbon Market and the Voluntary Carbon Markets Integrity Initiative matter. ICVCM focuses on credit quality through its Core Carbon Principles, while VCMI focuses on the claims companies make when using credits.

The UK Government has also signalled support for higher integrity. Its voluntary carbon and nature market principles encourage the use of high-integrity credits and accurate claims. The Government has also consulted on how to raise integrity in voluntary carbon and nature markets.

So the honest answer is:

Carbon credits should not be trusted blindly. They should be scrutinised.

A credible buyer should ask:

• Which standard issued the credit?

• What project does it come from?

• Is the project additional?

• Has it been independently verified?

• Is the carbon benefit already delivered or promised in the future?

• Has the credit been retired?

• What claim is the company making from it?

• Is there public evidence?

Trust has to be earned through transparency.

Verra and Gold Standard are two of the best-known names in the voluntary carbon market, but they are not the only standards or registries. Other standards and registries include:

• American Carbon Registry

• Climate Action Reserve

• Plan Vivo

• ART TREES

• Puro.earth

• Isometric

• Woodland Carbon Code

• Peatland Code

Different standards cover different project types, geographies and methodologies. For UK buyers, the Woodland Carbon Code and Peatland Code are especially relevant because they are rooted in UK land-based projects. These can appeal to businesses that want to support domestic nature restoration and explain their impact in a local context.

However, local does not automatically mean better. A UK woodland project may be attractive because it is tangible and close to home, but buyers still need to understand the difference between projected future carbon and verified delivered carbon. In the Woodland Carbon Code, for example, buyers may encounter Pending Issuance Units and Woodland Carbon Units. Broadly speaking, Pending Issuance Units represent expected future carbon sequestration, while Woodland Carbon Units are verified units. This distinction matters because a future promise is not the same as a carbon benefit that has already been verified.

This is where many businesses get confused. The badge or standard is important, but the details matter too.

Carbon credits are often grouped into three broad categories:

• Avoided emissions: preventing emissions that would otherwise have happened

• Reduced emissions: reducing emissions from an existing activity

• Carbon removals: removing CO₂ from the atmosphere and storing it

Avoidance credits are controversial because they depend on a counterfactual scenario. In plain English, they depend on proving what would have happened if the project had not existed. For example, a forest protection project may claim credits because it prevents deforestation. But critics may ask: was that forest really at risk? Would it actually have been cut down? Was the threat overstated? Did deforestation simply move somewhere else?

These are serious questions. But it does not follow that all avoidance credits are worthless. Avoidance can be valuable when the baseline is credible, the threat is real, the project is well monitored, leakage is addressed, and the carbon accounting is conservative. Preventing emissions can be enormously important, especially when protecting carbon-rich ecosystems or reducing methane.

However, for long-term net zero claims, carbon removals are becoming increasingly important. The UK’s Climate Change Committee expects engineered removals to play a role in future UK emissions reduction pathways, including technologies such as bioenergy with carbon capture and storage, direct air carbon capture and storage, enhanced weathering and biochar.

That does not mean every business should rush into expensive engineered removals immediately. But it does mean companies should understand the difference between avoiding emissions, reducing emissions and removing carbon from the atmosphere.

A simple way to explain it is: Avoidance can help prevent the problem getting worse. Removals help clean up carbon already in the atmosphere. Both can matter, but they should not be treated as identical.

This is one of the most dangerous misconceptions because it leads directly to weak claims. Buying carbon credits does not automatically make a company carbon neutral, and it is not the same as climate neutrality unless the claim scope and evidence are clearly defined. A credible carbon neutral claim needs much more than a purchase receipt. It should include:

• a clear emissions boundary for the company's footprint

• a robust carbon footprint calculation

• transparent reporting

• evidence of emissions reductions

• high-quality credits

• retirement of credits

• careful language

• no exaggeration

• accessible supporting information

In the UK, businesses must be particularly careful because environmental claims are subject to consumer protection and advertising rules. The CMA Green Claims Code and ASA guidance both make clear that businesses should avoid vague, misleading or unsubstantiated claims.

A vague claim might say:

“Our product is carbon neutral.”

A clearer claim might say:

“We have calculated the emissions associated with this product’s production and delivery, reduced emissions where currently possible, and purchased verified carbon credits equivalent to the remaining calculated emissions. More information about our methodology and supported projects is available here.”

Even then, businesses should be careful. The claim should explain whether it applies to the whole company, a product, an event, a delivery, or a specific service, and how you offset emissions within that defined boundary. It should also explain whether credits are reductions, avoidance credits or removals. For UK marketing teams, the lesson is clear: Do not make the claim bigger than the evidence.  A modest, specific, well-evidenced claim is more credible than a broad claim that sounds impressive but cannot be properly substantiated.

This misconception comes from a sensible place. The world absolutely needs direct decarbonisation. The UK needs cleaner power, better-insulated homes, low-carbon transport, greener industry, restored nature, reduced waste and more resilient communities. Carbon credits cannot replace any of that.

But it does not follow that carbon credits have no role in tackling climate change or the wider climate crisis. The transition to a low-carbon economy requires huge investment. Public finance alone will not be enough. Private finance will be needed for nature restoration, clean technology, carbon removal, methane reduction, industrial decarbonisation and climate resilience.

Carbon markets can be one way to mobilise that finance, and carbon credits play a vital role where organisations are dealing with hard to abate emissions on the way to a net zero future. In the UK, there are several relevant examples:

• The Woodland Carbon Code helps create a market mechanism for woodland creation.

• The Peatland Code helps support peatland restoration.

• The UK Emissions Trading Scheme creates a compliance carbon market for sectors such as power generation, energy-intensive industry and aviation, where emission allowances cap total emissions in regulated markets.

• The UK Government’s Carbon Capture, Usage and Storage programme supports technologies designed to capture CO₂ from industrial processes and store it permanently underground.

It is important not to confuse all these mechanisms. Voluntary carbon credits are not the same as UK ETS allowances, and nature-based credits are not the same as engineered carbon removals. But together, they show that carbon pricing, carbon finance and carbon accountability are becoming part of the wider net zero landscape. In 2024, the global market for emission allowances exceeded 1,000 billion euros, far larger than the voluntary market.

That matters because no single tool will cut global emissions or keep climate targets aligned with the paris agreement, and offsets alone will not stop global warming. Used carefully, they can still support climate commitments and wider global efforts. The responsible position is not:

“Carbon credits will solve climate change.”

Nor is it:

“Carbon credits are irrelevant.”

The better position is:

“Carbon credits are one imperfect but potentially useful tool. They must support, not replace, real emissions reductions.”

For UK businesses considering carbon credits, the most credible approach is to follow a clear order.#

1. Measure emissions first

You cannot manage what you have not measured, and the goal is to understand total emissions before making any offsetting claim. Start with Scope 1 and Scope 2 emissions, then identify the most material Scope 3 categories by looking across the supply chain.

2. Reduce emissions before making claims

Look for practical reductions in energy, travel, procurement, waste, logistics, digital infrastructure and product design to cut emissions at the source, including carbon dioxide, before considering carbon offsetting rather than treating credits as a substitute for lowering carbon emissions.

3. Be honest about what remains

No business is perfect. It is better to be transparent about residual emissions than to make sweeping claims.

4. Choose high-quality credits

Look for evidence that high quality projects deliver additionality, permanence, robust measurement, independent verification and retirement, because not all credits are created equal, and buyers should also look for projects with social benefits for local communities.

5. Match the credit type to the claim

Avoidance, reduction and removal credits are not the same. Do not use them as if they are interchangeable.

6. Avoid vague claims

Claims such as “eco-friendly”, “green”, “carbon neutral” and “climate positive” can be risky unless carefully explained and substantiated.

7. Publish supporting information

If you make a claim, make it easy for customers, partners or stakeholders to understand the basis of that claim.

8. Review claims regularly

A carbon claim should not be treated as permanent. Emissions data, standards, guidance and best practice change over time.

The carbon market does not need more hype. It needs more honesty. For UK companies, the strongest messaging is not defensive. It is transparent.

Instead of saying:

“Carbon credits make us sustainable.”

Say:

“Carbon credits are one part of our wider climate action plan. Our priority is to reduce emissions through internal reductions across our operations and value chain, then use credits only for hard to abate emissions. We use high-quality credits to support additional climate action, and carefully chosen carbon credit projects can support a sustainable future.”

Instead of saying:

“We are carbon neutral.”

Say:

“We have measured our emissions, are taking steps to reduce them, and have purchased verified carbon credits equivalent to our remaining calculated emissions for this defined period. We publish details of our methodology and supported projects.”

Instead of saying:

“Offset your impact.”

Say:

“Reduce what you can. Take responsibility for what remains. Support credible climate action beyond your own footprint, recognising the role carbon credits play as part of broader climate action, not a standalone fix.”

This language is more careful, but it is also more trustworthy.

And trust is the future of the carbon market.

Carbon credits are not perfect. They have been misused. Some have failed to deliver what they promised. Some claims around them have been too vague, too optimistic or too misleading. The sceptics are right to ask hard questions. But dismissing all carbon credits as useless is also too simplistic. High-quality credits can help finance climate projects, often in developing countries, restore nature, support communities with social benefits when well designed, and scale carbon removal.

In the UK, schemes such as the Woodland Carbon Code and Peatland Code show how carbon finance can be connected to domestic nature restoration. Internationally, initiatives such as ICVCM and VCMI are helping raise expectations around credit quality and corporate claims, with robust methodologies and verification making a meaningful difference. The future of carbon credits should not be built on easy claims. It should be built on integrity. For UK businesses, the rule is simple:

Reduce and Offset. Be transparent. Use high-quality credits carefully. Make claims that are specific, evidence-based and proportionate.

Carbon credits are not a licence to pollute. They are not a magic eraser. They are not the whole solution. But when used responsibly, they can support a net zero future as one useful tool in the wider transition to a lower-carbon economy, but only alongside real efforts to prevent emissions.