LocationsTrading carbon credits for a low-carbon future: your guide to net zero, climate and temperature neutrality
June 12, 2025
Imagine a world in balance: for every ton of carbon emitted, an equivalent is captured or removed. This is the heart of a low-carbon future, and carbon markets are a key tool helping countries get there. But how do these markets connect to climate targets like net zero, climate neutrality and temperature neutrality?
These three concepts may sound similar, yet each offers a distinct pathway toward a sustainable future. Understanding how they influence policy, investment and market design is critical as countries prepare for the 2030 climate milestone.
1. Defining the pathways
Net zero: driving deep emission cuts
Net zero means reducing greenhouse gas (GHG) emissions to as close to zero as possible, with any remaining emissions offset through removals. This is a scientifically grounded, measurable target, legally binding in countries such as the United Kingdom and New Zealand. Such commitments, backed by strong monitoring and verification, are transforming how nations produce energy, manage forests and innovate in green technologies.
Climate neutrality: flexibility in transition
Climate neutrality aims for no net impact on the climate system. This can involve a mix of emission reductions and offsetting projects like reforestation and land restoration. Countries such as Germany use this flexible approach, combining technological solutions with nature-based strategies and community-driven development.
Temperature neutrality: stabilizing the planet
Temperature neutrality takes a long-term view, focusing on ensuring cumulative emissions don't push the planet beyond safe temperature thresholds. While more conceptual, this goal guides global climate negotiations and promotes investment in durable, long-term solutions, such as regenerative agriculture and advanced carbon removal technologies.
2. Carbon markets: where ambition becomes action
Carbon markets allow countries and companies to trade verified carbon credits, creating incentives for emission reduction and clean development.
- Net Zero and carbon markets: Here, carbon credits adhere to strict standards. Countries with net-zero laws use detailed registries for transparency, typically using credits to compensate for hard-to-abate emissions.
- Climate neutrality and co-benefits: Climate-neutral carbon markets support a broader range of projects, including those with biodiversity, health and social benefits. A reforestation project, for instance, can generate credits while restoring ecosystems and supporting rural livelihoods.
- Temperature neutrality and long-term investments: Though not directly linked to carbon markets yet, temperature neutrality influences market design by promoting durable, long-term solutions like forest conservation and direct Carbon capture and storage, contributing to global climate stability.
Carbon markets: cutting pollution first, bringing benefits too Carbon markets are mainly designed to reduce greenhouse gas emissions, but they can do more. Many projects also support communities, create jobs, protect wildlife and unlock funding for climate and development in lower-income countries. These added benefits make carbon markets a shared gain for the planet and people
3. Country spotlights: leading the way
Nations worldwide are demonstrating diverse approaches to climate action:
- United Kingdom: The United Kingdom uses carbon budgets to guide its emissions cuts and has a legal net-zero target. It also has clear rules and systems to make sure carbon credits are used properly.
- Ireland: Ireland links climate policy with rural development. It supports farmers in reducing emissions through sustainable land use, while also investing in wind and solar energy. Its legally binding Climate Action Plan includes tools like carbon pricing and credit trading.
- Germany: Germany focuses on both climate neutrality and clean energy. It supports local and international carbon projects that deliver real environmental and social results. It also works closely with businesses and the European Union to strengthen carbon markets with strong rules.
- Sub-Saharan Africa: African countries are advancing climate strategies rooted in local priorities:
- Nature-based solutions: Kenya and Tanzania lead reforestation and sustainable agriculture projects, generating credits while restoring ecosystems.
- Renewable energy: South Africa and Ethiopia are scaling solar, wind, and hydro energy to reduce emissions and improve clean power access.
- Regional coordination: Initiatives like the Africa Carbon Markets Initiative (ACMI) aims to unlock climate finance through high-integrity carbon credits and job creation.
4. The road to 2030: ensuring integrity and impact
As 2030 approaches, enhancing transparency, accountability and ambition in climate action is paramount. Whether through net-zero commitments or flexible climate-neutral approaches, countries must build strong Measurement, Reporting and Verification (MRV) systems.
Well-functioning carbon markets can play a transformative role, but only if traded credits are real, additional and verifiable. High-integrity markets will help countries finance their climate goals while promoting global environmental stability.
5. Conclusion: one goal, many pathways
Whether it’s net zero, climate neutrality or temperature neutrality, all these approaches aim for the same result: a sustainable, safer, resilient and low-carbon world. Carbon markets are a key part of the journey - helping countries take action, channel finance and link national development ambitions with global climate goals.
Looking ahead, inclusive and transparent climate strategies—rooted in both science and development realities - will be essential for delivering just and lasting transitions.
About the Author
Excellent Hachileka is a Climate Policy Specialist at UNDP, with over 25 years of experience in climate change policy, carbon markets, and sustainable development. He supports governments across Africa and globally in designing transparent, flexible, and robust climate strategies. His work helps shape international climate negotiations and supports countries in building resilient, low-carbon futures.