Carbon Offsets

7 June 2024

What Are Carbon Offsets and How Do They Work?

As the world faces the dangers of climate change, both businesses and individuals are looking for ways to reduce their carbon footprint. One effective method is using carbon offsets. Let’s explore what carbon offsets are, how they work, and why they are important. We will also explain how businesses can use carbon offsets to help reach carbon neutrality and reduce greenhouse gas emissions.

What Are Carbon Offsets?

Carbon offsets are reductions in greenhouse gas emissions that help balance out emissions made elsewhere. When a business or person emits a tonne of CO2, they can buy carbon offsets to make up for it. These offsets are measured in metric tons of CO2 equivalent (CO2e). Projects that create these offsets include renewable energy, reforestation, and energy efficiency.

It’s important to know the difference between carbon offsets and carbon credits. Both aim to reduce emissions, but carbon credits are usually used in regulatory markets, while carbon offsets are part of voluntary efforts.

How Do Carbon Offsets Work?

Carbon offsetting involves several steps. First, a business or person calculates their carbon footprint. This means figuring out how much CO2 they are responsible for. Next, they buy carbon offsets from verified projects that reduce or capture CO2. These projects are listed in a carbon registry to ensure they are trustworthy.

Projects that generate these offsets come in many forms. Common types include:

  • Renewable energy projects like wind farms or solar panels that replace fossil fuel energy.
  • Reforestation projects that plant trees to absorb CO2.
  • Methane capture projects that collect methane from landfills or livestock and convert it into energy.
  • Energy efficiency projects that reduce energy use in buildings and industries.

By supporting these projects, businesses and individuals can offset their CO2 emissions and help reduce global greenhouse gas emissions.

The Benefits of Carbon Offsets

Offsets offer many benefits. They help fight climate change by reducing overall greenhouse gas emissions. Projects like reforestation also improve biodiversity and air quality.

For businesses, buying offsets can boost their reputation. Customers and investors appreciate companies that take steps to reduce their environmental impact. Achieving carbon neutrality can set a company apart from its competitors and build customer loyalty.

Offset projects also support local economies by creating jobs and fostering community development. For example, renewable energy projects provide long-term employment and improve local infrastructure.

Carbon offsets

Carbon Offsetting vs. Carbon Insetting

Understanding the difference between insetting and offsetting is key for businesses wanting to reduce their carbon footprint.

Carbon Offsetting is when businesses compensate for their emissions by investing in external projects, like renewable energy or forest conservation. They buy carbon credits from these projects to neutralize their emissions. However, this can sometimes let businesses avoid making big changes to their own operations.

Carbon Insetting is when businesses invest directly in their own supply chains to reduce emissions. This often involves practices like regenerative agriculture. It not only reduces emissions but also strengthens the supply chain and benefits local ecosystems and communities.

The main difference is that offsetting is external, while insetting is integrated into the business. Carbon Insetting can lead to long-term emission reductions and a more sustainable supply chain.

Both strategies help the environment, but carbon instets show a deeper commitment to sustainability. It’s an effective way for businesses to reduce their ecological footprint and integrate sustainability into their operations.

How to Purchase and Implement Carbon Offsets

To integrate offsets into a business’s strategy, follow these steps:

  1. Calculate your carbon footprint using tools to measure your company’s CO2 emissions from energy use, transportation, and waste.
  2. Set clear goals for reducing emissions and achieving carbon neutrality. This can include short-term and long-term targets.
  3. Identify credible offset projects and buy offsets that align with your sustainability goals. Make sure the projects are verified by recognized standards and registered with a reputable carbon registry.
  4. Integrate offsets into your broader sustainability strategy. Monitor progress and adjust as needed to meet your emission targets.

Examples of Carbon Offset Projects

Effective offset projects include:

  • Wind energy projects in India that install wind turbines to generate renewable energy and reduce CO2 emissions.
  • Amazon rainforest conservation projects that protect large areas of rainforest, sequestering CO2 and preserving biodiversity.
  • Methane capture projects at US landfills that install systems to capture methane and convert it into energy, reducing greenhouse gas emissions.
  • And many more

Common Questions and Misconceptions About Carbon Offsets

Here are some common questions about offsets:

Are offsets the same as carbon credits?

No. Offsets are usually used in voluntary markets, while carbon credits are part of regulatory compliance.

How are offsets verified? 

Projects are verified by third-party organizations and registered with carbon registries to ensure they are credible.

Can buying offsets alone make a business carbon neutral? 

Buying offsets is a big step towards carbon neutrality, but businesses should also work on reducing their emissions through efficiency and sustainable practices.


Carbon Offsets are a powerful tool to fight global warming. They help businesses and individuals reduce their carbon footprint and support sustainable projects worldwide. By understanding and using offsets, we can make significant progress towards reducing emissions and achieving a sustainable future.

However, carbon offsetting should go hand in hand with direct efforts to reduce emissions within operations. This leads to a more complete approach to sustainability. Understanding the difference between carbon offsetting and carbon insetting is crucial for a holistic strategy. Businesses should calculate their carbon footprint, set clear emission reduction targets, and invest in verified carbon offset projects through a reputable carbon registry. This helps achieve immediate carbon neutrality and supports long-term sustainability goals.

For more information on offsets and credits, read our article: Navigating the Carbon Maze: Understanding Offsets vs. Credits.