The world’s top polluters are increasingly relying on “carbon offsets” to make claims about slashing their climate impact and reaching net-zero.
Put simply, carbon-offsetting involves an entity that emits greenhouse gases into the atmosphere paying for another entity to pollute less.
For example, an airline in a developed country that wants to claim it is reducing its emissions can pay for a patch of rainforest to be protected in the Amazon. This – in theory – “cancels out” some of the airline’s pollution.
As Carbon Brief has detailed in a newly released explainer, the world of carbon offsets is complex and murky – with a single carbon-offset project often involving a host of different players and stakeholders in countries scattered across the world.
The complex nature of carbon offsets has given rise to an abundance of technical and often tricky-to-understand terms, phrases and acronyms.
This article is part of a week-long special series on carbon offsets.
Below, Carbon Brief provides the definitive guide to carbon offsets terminology – covering everything from the frequently-used to the obscure – in alphabetical order.
A
Additionality
A term to refer to a key issue for carbon-offset projects, which is whether they can be sure that the emissions reductions achieved are truly “additional” to what would have happened without the project. If not, the carbon offsets sold could be considered worthless.
African Carbon Markets Initiative
A scheme aiming to shape and boost the potential for carbon markets in Africa.
American Carbon Registry
A US-based NGO, which operates one of the world’s four largest “registries” for carbon-offset projects in the voluntary market and also oversees standards for generating offsets.
Article 6
The part of the Paris Agreement that includes three mechanisms for “voluntary cooperation” between countries towards climate goals, including carbon markets.
Article 6.2
The section of the Paris Agreement’s Article 6 that enables countries to directly trade carbon credits and other units such as gigawatts (GW) of renewable power with each other, dubbed Internationally Transferred Mitigation Outcomes (ITMOs).
Article 6.4
The section of the Paris Agreement’s Article 6 that establishes a new international carbon market to allow countries or companies to use carbon credits generated in other countries to help meet their climate targets.
Article 6.4 supervisory body
A 12-member body comprising country representatives, established at the COP26 climate summit to oversee and decide on rules for carbon-credit trading under Article 6.4 of the Paris Agreement.
Attributability
A term to refer to an issue for carbon-offset projects, which is whether they can be certain that the emissions reductions achieved are “attributable” to the project itself, rather than some other external factor. Related to, but distinct from “additionality”.
Avoidance/avoided emissions offsets
A type of carbon offset that involves emissions reductions compared to a hypothetical alternative. (For example, when a windfarm is built instead of a coal project.)
Avoided deforestation carbon-offset projects
Schemes that aim to avoid emissions by protecting forests that would have otherwise been cleared or degraded. Also called “forest protection schemes”.
B
Baseline issue
A term to describe how many carbon-offset projects overestimate their ability to reduce emissions by setting unrealistic baselines. (For example, forest protection schemes calculate carbon offsets based on how much deforestation they think would have occurred without their project, but research shows they often overestimate this.)
Bioenergy with carbon capture and storage (BECCS)
A carbon removal technique involving growing plants, burning them to generate energy and then capturing the resulting CO2 emissions before they reach the atmosphere. It is still in development, but may play a bigger role in carbon-offsetting in the future.
Buffer pool
Carbon credits set aside, instead of being sold, to cover any future harm that might befall a carbon-offset project. For example, a forestry-based project might burn in a wildfire.
C
California Air Resources Board
An agency of the government of California that aims to reduce air pollution. Part of this mandate involves running a compliance cap-and-trade programme to limit emissions in the state and issuing credits to comply with this programme.
Cap-and-trade
The basis of most emissions trading systems. Governments set limits on emissions from groups of regulated companies, each of which must submit tradable “allowances” for every unit of greenhouse gases they emit. Companies can buy allowances from each other or the government – although some may be given out for free.
Carbon capture and storage (CCS)
A technology for capturing CO2 as it is released by a polluting activity and storing it in the land or sea. Adding CCS to a fossil-fuel plant can generate carbon offsets.
Carbon colonialism
A term sometimes used in reference to richer nations “outsourcing” their responsibility to cut emissions to the developing world via carbon-offsetting.
Carbon credits
Tokens representing one tonne of CO2 equivalent that can be traded between an entity that continues to emit and an entity that reduces its own emissions or removes carbon dioxide (CO2) from the atmosphere. Used interchangeably with “carbon offsets”, (although, in theory, a credit could be purchased by an entity wanting to contribute to climate action, but without claiming it has “offset” its own emissions).
Carbon markets
Trading systems in which carbon credits can be bought and sold.
Carbon offsets
Tokens representing one tonne of CO2 equivalent that can be traded between an entity that continues to emit and an entity that reduces its own emissions or removes carbon dioxide (CO2) from the atmosphere. Often used interchangeably with “carbon credits”, (although “credits” do not necessarily have to be used to make claims or carbon neutrality or “offsetting” emissions).
Carbon-negative
A term used to describe a state where an entity’s CO2 emissions are supposedly more than balanced by efforts to reduce emissions and remove CO2 from the atmosphere. Many companies rely on offsets to make such claims.
Carbon-neutral
A term used to describe a state where an entity’s CO2 emissions are entirely balanced by efforts to reduce emissions and remove CO2 from the atmosphere. Many companies rely on offsets to make carbon neutrality claims. Often used interchangeably with net-zero.
Carbon-offset project
A scheme for reducing emissions or removing CO2 from the atmosphere that is at least partly financed through carbon offsets.
Carbon-offsetting
A process that allows individuals, businesses or governments to compensate for their emissions by supporting projects that reduce or remove emissions elsewhere.
Clean Development Mechanism
A UN mechanism established in 1997 that has allowed developed countries to meet parts of their binding climate targets by buying carbon credits largely generated by low-carbon energy projects in developing countries.
Clean cookstove carbon-offset projects
One of the most common kinds of carbon-offsetting projects, where the distribution of more efficient cooking equipment is intended to cut reliance on traditional fuels, such as firewood, leading to lower emissions.
Climate Action Reserve
A US-based NGO, which operates one of the world’s four largest “registries” for carbon-offset projects in the voluntary market and also oversees standards for generating offsets.
Compliance carbon markets
Regulated markets on which carbon offsets can be bought and sold. They are mandated by law, supported by common standards and count towards national or sub-national targets.
Core Carbon Principles
Ten principles for “high quality” carbon offsets on the voluntary market, as defined by the ICVCM in 2023. They cover governance, emissions impact and sustainable development.
Corsia
The commonly used abbreviation for the UN Carbon Offsetting and Reduction Scheme for International Aviation, which requires airlines to offset any emissions growth above 2019-2020 levels with carbon credits, starting in 2027 at the latest.
D
Direct air capture and storage (DACS or DACCS)
A technique that uses machines to suck CO2 straight from the atmosphere before burying it underground or under the sea. It is still in development, but may play a bigger role in carbon-offsetting in the future.
Double-counting
When two entities, such as governments, businesses or individuals, both use the same carbon credit to claim they have achieved their climate targets.
E
EU Emissions Trading System (EU ETS)
The EU’s “cap-and-trade” scheme for reducing emissions from power plants, factories and domestic airlines.
Emissions avoidance credits
A term used by UN climate negotiators in relation to a specific type of project for avoiding greenhouse gas emissions. Not to be confused with the broader term “avoided emissions offsets”.
Emissions reductions offsets
Offsets whereby an entity attempts to compensate for an increase in emissions in one area by decreasing emissions in another area. (For example, when a fossil-fuel company attempts to offset its emissions by paying for a tree-planting project.)
Emissions trading system
A market-based approach for cutting emissions, generally working using a “cap-and-trade” system, where companies must purchase emissions permits, or allowances, to remain within set limits. Sometimes, these schemes also allow participants to purchase external carbon offsets to meet their targets.
F
Forest protection schemes
Projects that aim to avoid emissions by protecting forests that would have otherwise been cleared or degraded. Also called “avoided deforestation projects”.
G
Gold Standard
A Swiss NGO, which operates one of the world’s four largest “registries” for carbon-offset projects in the voluntary market and also oversees standards for generating offsets.
Greenwashing
A term used for false, misleading or untrue claims about an entity’s positive impact on the environment. Some entities use carbon-offsetting to make claims that amount to greenwashing.
H
Hot air
A term used for carbon offsets that do not represent real emissions reductions.
I
Integrity Council for the Voluntary Carbon Market (ICVCM)
An independent governance body for the voluntary carbon market, which seeks to define new standards for high-quality carbon offsets.
Internationally Transferred Mitigation Outcomes (ITMOs)
Credits that can be traded between Paris Agreement parties to meet climate goals under the new Article 6.2 system.
J
Joint Implementation
A UN mechanism that allowed developed countries to trade carbon offsets between themselves.
Junk offsets
A term used for carbon offsets that do not represent real emissions reductions.
L
Leakage
A term used for concerns that introducing a carbon-offset project in one region could lead to new emissions happening elsewhere. For example, if a forest protection scheme opens in one patch of the Amazon, deforesters may simply respond by logging another area.
M
Mitigation contribution
A term used for credits that cannot be counted towards the climate targets of the entity buying them. The buyer is making a “contribution” to the associated emissions cuts, but cannot count the emissions cuts as their own.
N
Net-zero
A term used to describe a state where an entity’s emissions are entirely balanced by efforts to reduce emissions and remove CO2 from the atmosphere, giving a “net-zero” impact. It can be used legitimately or unscrupulously. Many companies rely on carbon-offsetting to make net-zero claims.
O
Oxford Offsetting Principles
An academic framework that seeks to define “best practices” for carbon-offsetting.
P
Permanency
A term used in reference to how different carbon-offset projects can reduce emissions over various timescales. For example, carbon stored in a forest may remain there for tens to hundreds of years, whereas CO2 injected into rock can remain there for thousands of years. Not adequately considering permanency can lead to projects overestimating their ability to reduce emissions.
R
Reducing emissions from deforestation in developing countries plus (REDD+)
A scheme developed at the UN in the late 2000s as a way to help developing countries preserve their forests. It is part of the Paris Agreement. Separately, projects labelled as REDD+ – which may not be aligned with UN rules – have emerged as a major part of the voluntary offset market.
Registries
Bodies that track offset projects as they are bought and sold, and also “issue” carbon offsets – meaning they confirm that a number of tonnes of CO2 has been cut, avoided or removed by a project. The largest in the voluntary carbon market are run by Verra, Gold Standard, the American Carbon Registry and the Climate Action Reserve.
Removals offsets
A type of carbon offset generated by projects that absorb CO2 from the atmosphere, such as tree-planting schemes.
Renewable energy carbon-offset projects
A kind of carbon-offset project where renewable energy projects are built in the place of fossil-fuel projects, hypothetically leading to lower emissions. Renewable energy carbon-offset projects often come with “additionality” concerns.
Retired credits/offsets
Carbon credits are bought and “retired” when an entity wishes to count them towards its voluntary goal or binding emissions target. Once retired, they cannot be used again.
S
Science-Based Targets initiative
Partnership between the NGO CDP, the UN Global Compact, World Resources Institute and WWF, which defines best practices in climate targets, including offset use, and provides support to companies setting “science-based” targets.
Standards
Sets of guidance on the monitoring and reporting of emissions cuts from offset projects. Registries tend to operate their own standards for offsets they are tracking – for example, Verra oversees the Verified Carbon Standard. There are also UN standards, for example under the Clean Development Mechanism.
T
Taskforce on Scaling Voluntary Carbon Markets
Private sector-led initiative established by former Bank of England governor Mark Carney to scale up the voluntary carbon market, in order to help meet the goals of the Paris Agreement. It launched the ICVCM in 2021.
V
Verified Carbon Standard
A set of standards for carbon-offsetting projects in the voluntary carbon market overseen by Verra, the world’s largest voluntary offsetting “registry”.
Verra
A US-based NGO that runs the world’s largest “registry” for carbon-offset projects in the voluntary market. It oversees a set of standards for carbon-offsetting called the “Verified Carbon Standard”.
Voluntary Carbon Markets Integrity Initiative (VCMI)
International NGO that seeks to improve the quality of carbon offsets by providing guidance to both buyers and sellers.
Voluntary carbon market
A largely unregulated market where carbon offsets are traded by corporations, individuals and organisations that are under no legal obligation to make emission cuts.
This article is part of a week-long special series on carbon offsets.