Carbon credits are a key piece of the market that allows companies to balance their emissions with investments in forests and other emission-reducing projects. The voluntary carbon market is growing as companies make pledges to reduce their net emissions to zero and seek ways to meet those commitments.

Many of the buyers of carbon credits are tech and energy companies that use them to offset their remaining emissions, or finance investments in lower-carbon alternatives. Increasingly, however, companies in other sectors are also participating as they set their own net-zero targets and look for ways to hedge against the financial risks of an energy transition.

Forests are responsible for a third of global greenhouse gas emissions and play an essential role in biodiversity. Nevertheless, many of the world's most important forests have been under threat from development and natural disasters, and some are already being lost at alarming rates. For these reasons, reducing deforestation is among the top priorities of many of the world's governments and international organizations.

But how does the carbon credit market address deforestation? This five-part series for Mongabay explores criticisms of the market and of forest conservation projects that generate credits. It draws on perspectives from project developers, standards-setting groups and intermediaries, community representatives and scientists.

The first part of the series looks at the ways that credits are created and used by projects that aim to cut emissions through forest conservation. These projects, known as REDD+ (Reducing Emissions from Deforestation and forest Degradation), are the largest source of credits in the voluntary carbon market.

These projects typically pay governments, institutions, communities and individuals in forest landscapes in developing countries for activities that preserve forests and avoid deforestation and degradation. To meet the requirements for a credit, projects must be verified as producing emissions reductions through a rigorous process. Credits are then bundled into portfolios that can be purchased by investors on the public market, through brokers and exchanges like the New York-based Xpansiv CBL or the Singapore-based AirCarbon Exchange.

Despite the high value placed on these certificates, controversy has swirled around the integrity of the voluntary carbon market in recent years. Critics argue that the complexities of measuring and verifying the benefits of carbon-cutting projects mean they can be gamed, and that standards-setting bodies should be more rigorous in setting the guidelines and criteria for how credits are calculated and verified.

But proponents of the market argue that the integrity of credits is improving. The emergence of independent, third-party assessments to verify the accuracy of claims and to identify flaws in forestry projects is one of the factors that is driving this improvement. Other changes include the establishment of a network of regional offices to assist project developers, and the development of a new set of integrity principles for the global carbon markets. These measures should help ensure that the voluntary market can deliver on its promise to support low-carbon development. But it is important to remember that carbon projects are not a license to pollute, and that if companies are going to use carbon credits, they need to do more than just buy them.