Offsetting: Definition

Carbon offsetting is compensating for your own emissions by buying carbon credits. Each credit represents one tonne of carbon dioxide equivalent (CO2-e) that a project has avoided or removed from the atmosphere, such as reforestation, soil carbon or landfill gas capture.

Avoidance vs removal

• Avoidance credits pay for emissions that would otherwise have happened, for example protecting a forest from clearing.
• Removal credits pay for carbon actually taken out of the atmosphere and stored, for example new plantings or soil carbon.

Removals are increasingly expected for net zero claims, because only removals balance residual emissions over the long term.

What makes a credit credible

Look for additionality (the reduction wouldn’t have happened without the credit), permanence (the carbon stays stored), robust measurement, and no double counting. In Australia, Australian Carbon Credit Units (ACCUs) are issued by the Clean Energy Regulator; international credits are issued under standards such as Verra and Gold Standard.

Offsetting and your claims

Offsetting should come after reduction, not instead of it. SBTi does not count credits towards emissions reduction targets. Under AASB S2, if your targets rely on carbon credits you must disclose how much and what kind. The ACCC’s guidance on environmental claims warns that “carbon neutral” claims based on offsets must be accurate and clearly explained, which is where many greenwashing cases start.