The Regenesis program also encourages private land owners to plant forests and sell their carbon credits to individuals or small businesses.
Each credit will offset a tonne of carbon and be available to buy and sell on an online registry.
To date, 33 forests have been planted on a combination of council, Crown and residential land in the Blacktown and Liverpool Plains regions
The forests contain 220,000 native trees planted on more than 100 hectares and have been grown according to the carbon trading requirements established by the Kyoto Protocol.
"We've always considered ourselves a leader in local government and this is another opportunity to showcase Blacktown as the first council to do this," the Mayor of Blacktown, Alan Pendleton, said.
"We are leading the way and at the same time have created 21 urban forests within the city which will be a benefit to the environment as well as any carbon offsets we get."
The program, which was funded by a $2 million state grant, would make carbon trading accessible to local governments, farmers, community groups and residents.
