Key terms used in carbon markets, nature-based solutions, and climate finance.
Nature-Based Solutions (NbS)Actions to protect, sustainably manage, and restore natural or modified ecosystems that address societal challenges such as climate change, while simultaneously providing biodiversity benefits and human well-being. Examples include reforestation, mangrove restoration, and regenerative agriculture.Voluntary Carbon Market (VCM)A decentralised market where private actors voluntarily buy and sell carbon credits that represent verified greenhouse gas emission reductions or removals. Unlike compliance markets (such as the EU ETS), participation is not mandated by regulation.Carbon CreditA tradeable certificate representing the reduction or removal of one metric tonne of carbon dioxide equivalent (tCO2e) from the atmosphere. Carbon credits are generated by projects that reduce, avoid, or remove greenhouse gas emissions.Verra (VCS)The Verified Carbon Standard, administered by Verra. The largest voluntary carbon market standard by issued credits, covering agriculture, forestry, and other land use (AFOLU) projects, as well as energy, industrial, and waste-sector methodologies.Gold StandardA certification standard for carbon offset projects founded by WWF. Gold Standard certifies projects that deliver measurable climate and sustainable development benefits, with a strong focus on stakeholder consultation and co-benefits.REDD+Reducing Emissions from Deforestation and Forest Degradation, plus conservation, sustainable forest management, and enhancement of forest carbon stocks in developing countries. REDD+ is a framework under the UNFCCC that provides financial incentives to reduce forest emissions.Article 6 (Paris Agreement)Article 6 of the Paris Agreement establishes mechanisms for international carbon market cooperation. Article 6.2 enables bilateral trading of Internationally Transferred Mitigation Outcomes (ITMOs), while Article 6.4 creates a centralised crediting mechanism supervised by the UN.BiocharA stable form of carbon produced by heating organic biomass (such as agricultural waste) in a low-oxygen environment through pyrolysis. When applied to soil, biochar sequesters carbon for hundreds to thousands of years while improving soil fertility and water retention.AgroforestryA land-use system that integrates trees and shrubs with crops and/or livestock on the same land. Agroforestry sequesters carbon in woody biomass and soil while providing economic benefits through diversified farm outputs.Project FinanceA financing structure where the debt and equity used to finance a project are repaid from the cash flows generated by the project itself, rather than from the balance sheet of the project sponsors. In natural capital, project finance structures are used to fund large-scale NbS deployments.Structured DebtDebt instruments that are tailored to the specific cash flow profile and risk characteristics of a project or portfolio. In the context of nature-based solutions, structured debt may include revenue-participation notes, carbon credit-linked bonds, or blended finance instruments.Corresponding AdjustmentAn accounting entry required under Article 6 of the Paris Agreement to prevent double counting when carbon credits are transferred internationally. The selling country adds emissions to its national accounts while the buying country subtracts them.