akar.earthCarbon credit: Definition
What is a carbon credit? A plain definition, how credits are created, verified and retired, what drives quality and price, and how Indonesia's market works.
A carbon credit is a tradable certificate representing one tonne of CO2 equivalent (tCO2e) reduced, avoided or removed from the atmosphere by a verified project. Companies and governments buy credits to fund climate action and, once retired, to support climate claims.
Why it matters
Carbon credits move finance to activities like forest protection, reforestation and mangrove restoration that would otherwise struggle to get funded. For Indonesia, a major supplier, credits are a potential income source for concessions, communities and smallholders. Quality varies, and so does the credibility of claims made with credits.
How credits are created
- A project applies an approved methodology and is validated.
- It monitors results, which an independent VVB verifies.
- The programme issues serialised credits in its registry.
- Credits are sold, then retired by the end user against a claim.
Our guide on how forest carbon credits work explains each step. Quality signals include ICVCM’s CCP label, which needs “two ticks”: a CCP-Approved methodology used under a CCP-Eligible programme. Rating agencies add another layer, and prices rise about 40% per rating band. See carbon credit pricing.
Indonesia angle
Southeast Asia had issued 129 million NbS credits under VCS and Gold Standard by April 2025, about 22% of global NbS issuance, with Indonesia providing 59.3% of the regional total. Domestically, Perpres 110/2025 anchors carbon trading. IDXCarbon, supervised by OJK, trades SPE-GRK offsets and PTBAE-PU allowances, with units recorded in SRUK. Permenhut 6/2026 names social forestry, customary forests and communities as equal participants in forestry carbon trading.
Common mistakes
- Treating all credits as equal regardless of type, vintage or rating.
- Claiming offsets without retiring credits.
- Ignoring domestic authorisation rules when buying Indonesian credits for international use.
Related terms
See carbon offset, removal credit and retirement, or explore the climate finance hub.
Frequently asked questions
How much is one carbon credit?
One credit represents one tonne of CO2 equivalent. Prices vary widely by project type, vintage, rating and market. Indonesian credits still trade at a fraction of real abatement cost.
Who issues carbon credits?
Carbon programmes such as Verra, Gold Standard, Plan Vivo and ART issue credits in their registries after independent verification. Indonesia issues domestic units recorded in SRUK.
What makes a high-quality carbon credit?
Additionality, a conservative baseline, robust measurement, permanence safeguards, no double counting and strong social safeguards. The ICVCM CCP label is one marker.