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.
Below, Carbon Brief provides the definitive guide to carbon offsets terminology – covering everything from the frequently-used to the obscure – in alphabetical order.
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.
A scheme aiming to shape and boost the potential for carbon markets in Africa.
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.
The part of the Paris Agreement that includes three mechanisms for “voluntary cooperation” between countries towards climate goals, including carbon markets.
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).
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.
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.
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”.
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.)
Schemes that aim to avoid emissions by protecting forests that would have otherwise been cleared or degraded. Also called “forest protection schemes”.
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.
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.
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.
A term sometimes used in reference to richer nations “outsourcing” their responsibility to cut emissions to the developing world via carbon-offsetting.
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).
Trading systems in which carbon credits can be bought and sold.
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).
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.
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.
A scheme for reducing emissions or removing CO2 from the atmosphere that is at least partly financed through carbon offsets.
A process that allows individuals, businesses or governments to compensate for their emissions by supporting projects that reduce or remove emissions elsewhere.
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.
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.
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.
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.
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.
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.
The EU’s “cap-and-trade” scheme for reducing emissions from power plants, factories and domestic airlines.
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”.
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.)
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.
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.
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.
A type of carbon offset generated by projects that absorb CO2 from the atmosphere, such as tree-planting schemes.
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.
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.