Carbon Offset
Definition
A carbon offset is a reduction or removal of greenhouse gas emissions made to compensate for emissions occurring elsewhere. Offsets are typically measured in metric tonnes of CO2 equivalent and can be generated through projects such as reforestation, renewable energy, or methane capture. They are purchased as credits on voluntary or compliance carbon markets.
Why It Matters
Carbon offsets remain controversial in ESG circles, as critics argue they can delay genuine emission reductions. High-quality offsets with verified additionality and permanence are increasingly distinguished from low-quality alternatives.
Related Terms
Carbon Credit
A carbon credit is a tradeable certificate representing the right to emit one metric tonne of carbon dioxide or its equivalent in other greenhouse gases. Credits are generated through verified emission reduction or removal projects and can be traded on voluntary or compliance carbon markets. They serve as a market-based mechanism for incentivising emissions reduction.
Net Zero
Net zero refers to achieving a balance between the greenhouse gases emitted into the atmosphere and those removed from it. This means reducing emissions as much as possible and offsetting any remaining emissions through carbon removal projects. The goal is to limit global warming to 1.5°C above pre-industrial levels.
Carbon Neutrality
Carbon neutrality means achieving a state where the net carbon dioxide emissions associated with an entity or activity are zero. This is typically achieved by measuring emissions, reducing them as far as possible, and then compensating for remaining emissions through carbon offsets. Carbon neutrality differs from net zero, which usually requires deeper absolute emission reductions.
Nature-Based Solutions
Nature-based solutions are actions that protect, sustainably manage, or restore natural ecosystems to address societal challenges such as climate change, biodiversity loss, and disaster risk. Examples include reforestation, wetland restoration, and sustainable agriculture. They provide co-benefits for both people and biodiversity.