Carbon Offsets, Explained: What They Actually Do (and How to Spot Greenwashing)
Offsets don’t erase your emissions—they finance reductions or removals elsewhere. The real question is whether the “ton” is real, additional, durable, and not double-counted.

Key Points
- 1Recognize the core truth: offsets don’t cut your emissions; they fund reductions/removals elsewhere, and credibility depends on integrity and evidence.
- 2Distinguish credit types: avoided/reduction tons rely on counterfactual baselines, while removal tons can be measured and paired with more durable storage.
- 3Demand proof before believing claims: additionality, MRV, permanence, and no double counting determine whether “carbon neutral” is climate action or greenwashing.
A carbon credit is supposed to be simple: pay for one metric ton of carbon pollution to be reduced or removed somewhere else, then retire the credit so nobody can claim it twice. Yet in the real world, “a carbon credit” can mean almost anything—an avoided ton that never materializes, a removed ton stored for centuries, or a ton that only exists on paper because the “what would have happened” math was overly generous.
The most uncomfortable truth about offsets is also the most clarifying one: buying them does not cut your own emissions. Offsets are a financing mechanism and a claims tool. Their climate value lives or dies on integrity—whether the underlying impact is real, additional, accurately measured, durable, and not double-counted.
Markets are trying to grow up. Regulators are tightening language, standards are pushing “reduce first,” and new integrity benchmarks are sorting higher-quality credits from the rest. For companies and consumers alike, the question has shifted from “Should we offset?” to something sharper: What are we actually claiming—and can we prove it?
“Buying offsets doesn’t reduce your own emissions. It changes the story you tell about them—and that story needs receipts.”
— — TheMurrow Editorial
What a carbon offset is—and what it isn’t
That definition sounds technical, but the practical point is plain. Offsets do not directly reduce the emissions from your factory, flight, or supply chain. They fund (or claim to fund) emissions reductions or removals elsewhere, and the buyer then uses that to justify a statement: “offset,” “compensate,” “carbon neutral,” “net zero,” or a softer “we contributed to climate action.”
The unit is simple; the counterfactual isn’t
A credit also functions as three things at once:
- A measurement claim (the ton exists and is quantified correctly)
- A financial instrument (money changes hands and incentives shift)
- A marketing input (it supports a public statement)
Each layer creates opportunities for error—and for abuse—so integrity becomes the whole game.
Two types of credits that behave very differently
- Avoidance/Reduction credits: claim to avoid future emissions (e.g., preventing deforestation, methane capture, clean cookstoves).
- Removal credits: claim to remove CO₂ from the atmosphere (e.g., direct air capture with storage, biochar, some forestry that demonstrably increases carbon stocks).
That distinction matters because “avoided” emissions are inherently counterfactual, while removals can be more directly measured—especially when paired with durable storage.
“The difference between ‘avoided’ and ‘removed’ isn’t semantics. It’s the difference between a prevented future and a measured reality.”
— — TheMurrow Editorial
How companies actually use offsets: from “carbon neutral” to careful language
Many standards and advisors have warned that “carbon neutral product” claims can mislead consumers into believing the product has no climate impact. In practice, the emissions still happened; the company is asserting a balancing act elsewhere.
“Offsetting” vs. “contribution” claims
- “Contribution claims”: the company supports climate action, without asserting that emissions were balanced.
- “Offset claims”: the company claims some share of its emissions has been neutralized through offsets, which demands stricter substantiation.
The Council of the EU’s 2024 discussion of the Green Claims Directive reflects that tension: climate language is being treated less as branding and more as a claim that must hold up under scrutiny. That is a cultural change as much as a regulatory one.
“Reduce first” becomes the new baseline expectation
The Science Based Targets initiative (SBTi) describes action outside a company’s value chain as beyond value chain mitigation (BVCM) and is clear about its role: it should not replace or delay value-chain decarbonization. BVCM is framed as “above and beyond,” not an escape hatch.
That change matters for credibility. Readers, customers, and investors increasingly interpret offsets as acceptable only after meaningful internal reductions.
Avoided emissions vs. removals: why “net zero” is pushing the market
Why removals are gaining ground
- Prioritizing emissions cuts
- Transitioning toward carbon removals
- Increasing preference for durable storage as a company approaches net zero
That preference reflects a simple logic. A ton you avoid today is a ton that might have been emitted; a ton you remove is a ton that was already in the air. Both can matter, but they are not interchangeable in a net-zero storyline—especially if the avoidance credit relies on fragile assumptions.
Permanence is the uncomfortable question
Forestry-related removals can reverse through wildfire, disease, or logging. Soil carbon can be disturbed. Durable storage solutions are designed to keep carbon sequestered longer, but they often come with higher costs and a more limited supply.
The direction of travel is clear in major guidance: the closer a company gets to net zero, the less defensible it becomes to lean on short-lived or uncertain “reductions” to balance ongoing emissions.
“Net zero isn’t a vibe. If the carbon comes back, the claim collapses.”
— — TheMurrow Editorial
The integrity tests that separate real climate impact from paper claims
The core integrity checklist
- Additionality: would the project have happened anyway without carbon credit revenue?
- Baseline accuracy: is the “what would have happened” scenario conservative and evidence-based?
- Leakage: do emissions increase elsewhere as a side effect (e.g., deforestation moves next door)?
- Permanence / reversal risk: could stored carbon be released later?
- MRV (Monitoring, Reporting, Verification): are outcomes measured, audited, and updated with improved data?
- Double counting: can the same reduction be claimed by multiple parties (multiple buyers or buyer + host country)?
Each of these is a technical term, but none is abstract. Additionality is the difference between financing change and paying for business as usual. Permanence is the difference between a temporary dip and a lasting benefit. Double counting is the difference between one ton and two entities claiming the same ton.
Why additionality is where credits often fail
Reuters reported in August 2024 that about one-third of existing carbon credits (by volume) failed a new benchmark test, with a key driver being renewable energy credits that often cannot demonstrate additionality in markets where clean power is already cost-competitive or driven by policy.
That finding isn’t an argument against renewables. It’s a reminder that a good project can still produce a weak credit if the crediting logic can’t show the project depended on carbon finance.
Practical implication: buyers cannot assume that “a worthy cause” equals “a defensible offset.”
Case study: the renewable energy credit problem and the “good project, bad credit” trap
In many markets, renewable generation is increasingly the cheapest new power. Governments also mandate or subsidize clean energy. In that context, selling carbon credits for renewable projects can fail the additionality test: the project may have happened anyway.
Reuters’ 2024 report put a number on the concern: roughly one-third of existing credits (by volume) failed a benchmark assessment, and renewable energy credits were a major culprit because additionality was hard to prove.
What this means for buyers
For consumers and stakeholders, the lesson is equally sharp: a climate label is only as strong as the method behind it. If the method relies on a baseline that collapses under scrutiny, the label becomes a marketing gesture.
A more honest use case: financing without pretending it erases emissions
That is where “contribution” language—explicitly separated from offsetting—has begun to look less like hedging and more like honesty.
Key Insight
The market’s attempt to clean itself up: ICVCM and the push for thresholds
ICVCM and the Core Carbon Principles
The significance is not the exact count—ten principles—but the direction: buyers and intermediaries have been asking for a floor beneath the market. Without a threshold, “carbon credit” remains a vague promise rather than a reliable instrument.
The tension: standardization vs. nuance
- Credits differ by project type, geography, and monitoring feasibility.
- Some benefits are easier to measure than others.
- Permanence varies dramatically between project categories.
A strong integrity framework sets minimum expectations—on additionality, MRV, double counting, and more—but serious buyers still need category-by-category judgment. No seal can outsource thought.
Practical takeaway: treat integrity labels as the start of diligence, not the end of it.
Practical takeaway
What readers should look for: practical due diligence and smarter claims
A short buyer’s checklist (even if you’re not a specialist)
- What kind of credit is it—avoidance/reduction or removal?
- What is the baseline, and is it conservative?
- How is additionality argued? Would this happen without credit revenue?
- What is the permanence risk, and how is reversal handled?
- What MRV exists—who verifies, and how often?
- How is double counting prevented? Is the credit retired, and where?
- How does the company describe the claim? “Offset” versus “contribution” signals different levels of implied balancing.
These questions aren’t gotchas. They are the minimum needed to interpret what a “ton” actually represents.
Offset due diligence: the minimum questions
- ✓What kind of credit is it—avoidance/reduction or removal?
- ✓What is the baseline, and is it conservative?
- ✓How is additionality argued? Would this happen without credit revenue?
- ✓What is the permanence risk, and how is reversal handled?
- ✓What MRV exists—who verifies, and how often?
- ✓How is double counting prevented? Is the credit retired, and where?
- ✓How does the company describe the claim—“offset” or “contribution”?
How to talk about offsets without misleading people
SBTi’s framing of BVCM is useful here: companies can fund climate action outside their value chain while still acknowledging that the priority is reducing their own emissions, not purchasing a narrative.
The most credible posture today is straightforward:
1. Measure emissions.
2. Reduce emissions aggressively in your own operations and supply chain.
3. Use external finance in a transparent way—preferably aligned with more durable outcomes as net zero approaches.
The most credible posture today
- 1.Measure emissions.
- 2.Reduce emissions aggressively in your own operations and supply chain.
- 3.Use external finance in a transparent way—preferably aligned with more durable outcomes as net zero approaches.
A harder, more honest way to think about offsets
The market is responding. The EU’s distinction between contribution and offset claims signals growing regulatory seriousness about consumer interpretation. SBTi’s insistence that beyond-value-chain action must not delay internal cuts reflects a broader consensus: offsets are not a substitute for decarbonization. The Oxford Principles’ 2024 revision sharpens the point further, urging a shift toward removals and durable storage as net zero nears.
Reuters’ 2024 finding that about one-third of credits (by volume) failed a benchmark test should be read as a warning, not a verdict. A ton is not a ton is not a ton. Quality varies, and the burden is shifting toward proof.
Offsetting can still play a role—especially as climate finance—if buyers stop treating credits as absolution and start treating them as what they are: instruments that require skepticism, evidence, and restraint.
1) What exactly is a carbon offset?
2) Do carbon offsets reduce a company’s own emissions?
3) What’s the difference between avoided emissions and removals?
4) Why do some carbon credits fail integrity tests?
5) What does “additionality” mean in plain English?
6) What’s the difference between an “offset” claim and a “contribution” claim?
7) Are new standards making offsets more trustworthy?
Frequently Asked Questions
What exactly is a carbon offset?
A carbon offset (often called a carbon credit) is a tradable unit that typically represents 1 metric ton of CO₂-equivalent (tCO₂e) reduced, avoided, or removed compared to a defined baseline. When used for a claim, it should be retired on a registry so it can’t be used again. The credit’s value depends on whether the underlying impact is real and properly verified.
Do carbon offsets reduce a company’s own emissions?
No. Offsets do not directly cut the buyer’s operational or supply-chain emissions. They finance (or claim to finance) climate action elsewhere, which the buyer then uses to support a climate statement such as “offset” or “carbon neutral.” Major frameworks increasingly emphasize “reduce first,” then consider external credits for residual emissions.
What’s the difference between avoided emissions and removals?
Avoidance/reduction credits claim to prevent future emissions (for example, by reducing deforestation pressure or capturing methane). Removal credits claim to take CO₂ out of the atmosphere (for example, through direct air capture with storage or biochar). Net-zero-alignment guidance increasingly favors removals with durable storage, especially for residual emissions.
Why do some carbon credits fail integrity tests?
Credits can fail on additionality (the project would have happened anyway), inflated or unrealistic baselines, weak monitoring/verification, leakage (emissions shift elsewhere), weak permanence (carbon returns to the air), or double counting. Reuters reported in August 2024 that about one-third of credits (by volume) failed a new benchmark test, with renewable energy credits often struggling on additionality.
What does “additionality” mean in plain English?
Additionality asks whether carbon credit revenue caused the climate benefit. If a project would have been built anyway—because it’s already profitable or required by policy—then issuing credits may not represent extra emissions reductions. Additionality is hard to prove, but it is central to whether an offset is more than a symbolic purchase.
What’s the difference between an “offset” claim and a “contribution” claim?
An offset claim implies emissions were balanced by reductions/removals elsewhere, so it requires strong substantiation and careful accounting. A contribution claim frames the purchase as supporting climate action without asserting that the buyer’s emissions were neutralized. EU policy discussions around green claims have highlighted this distinction as part of tightening expectations for marketing language.















