Carbon Offsetting

A carbon offset represents a greenhouse-gas emission reduction or removal used to compensate for emissions occurring elsewhere. A carbon-offset credit typically represents one metric tonne of carbon dioxide equivalent (tCO2e) reduced, avoided or removed relative to a specified baseline. It is an accounting claim about a mitigation outcome, not evidence that the buyer's own emissions have physically decreased.

What the credit measures

The quantity credited is measured against a baseline, which describes what emissions or removals would have occurred without the mitigation activity. Carbon dioxide equivalent expresses the climate effects of different greenhouse gases in a common unit.

• An emission-reduction activity lowers emissions relative to the baseline, while a removal activity takes greenhouse gases out of the atmosphere and stores them.
• For example, methane capture can reduce emissions, while forest restoration can remove carbon dioxide as trees grow.
• The credited quantity is not necessarily an absolute fall in total emissions: emissions may still rise while remaining below the estimated baseline.

Conditions for a credible offset

A credit provides credible compensation only if the underlying mitigation outcome is real, appropriately quantified and not claimed more than once.

• Additionality means that the credited reduction or removal would not have occurred without the incentive provided by the offset mechanism.
• A credible baseline and monitoring, reporting and verification are needed to substantiate the credited quantity.
• Leakage, where an activity causes emissions to increase outside its accounting boundary, must be accounted for.
• Stored carbon can be released again, so permanence and the risk of reversal matter, particularly for biological carbon storage.
• Double counting must be avoided, and a credit used for compensation must be retired so that it cannot be used again.

How offsets differ from direct mitigation

An organisation that emits ten tonnes of CO2e and retires ten valid one-tonne offset credits still has ten tonnes of gross emissions. Its compensation claim rests on an equivalent mitigation outcome elsewhere; the offset does not erase those emissions from its own emissions inventory.

• An emission allowance authorises emissions under a cap-and-trade system, whereas an offset credit represents a reduction or removal against a baseline.
• Offsets cannot substitute for sustained emission reductions: their value depends on the integrity of the credited outcomes.