Understanding Carbon Offsets

The Role of Offsets in Carbon Management Strategies

In principle, carbon offset credits offer a convenient and cost-effective way to reduce GHG emissions. Often, this means offset credits are used to compensate for (or “offset”) an organization’s GHG emissions, in lieu of reducing those emissions directly. For example, since most organizations find it impractical to completely eliminate their carbon footprint using only internal measures, carbon offsets offer the only practical way to claim “carbon neutrality.” If your organization pursues carbon neutrality, however, it should still seek to use carbon offsets sparingly (see Achieving carbon neutrality).

In the future, international policy efforts could make it more difficult for organizations to establish valid voluntary offset claims (see Carbon offsets after 2020: the world under Paris). This could change how most buyers approach the use of offset credits. Instead of offsetting GHG emissions, for example, credits may be used to indicate an organization’s charitable contribution to external climate change mitigation efforts. One indication of this shift in thinking is the increasing use of the term “carbon credit” rather than “offset credit” to refer to the commodity being purchased. In this guide, we continue to use the term “offset credit” since the underlying principles involved remain the same.