Offsets vs. Credits

Learn the difference between the oft-confused carbon credits and carbon offsets.

by Greenwashed

Offsets vs. Credits
Photo by v2osk / Unsplash



Both carbon credits and carbon offsets represent a one-tonne reduction in or removal of greenhouse gas (GHG) emissions that compensate for CO2 emitted elsewhere.

They both provide a way to combat climate change and balance pollution levels. Similarly, once a carbon offset or credit is purchased, that credit is “retired” and cannot be sold or reused.

However, they are fundamentally different in how they are created and what they do to help the climate.


While “offset” and “credit” seem synonymous, each serves a unique purpose with different products. 

Offsets represent GHGs that have been removed or avoided somewhere in the world. Credits represent the failure or success of meeting an emissions requirement imposed by the government.

In short:

Carbon credit markets make industries reduce pollution by setting caps and forcing corporations to pay more in costs if they do not reduce internal emissions.

Carbon offset markets represent the direct removal of greenhouse gases from the atmosphere paid for voluntarily by people or companies looking to neutralize their carbon footprint.

Explaining the Product


Producing a carbon offset introduces a technique called carbon “sequestration,” which means “to hide away.” 

Essentially, the GHGs are taken from the atmosphere and “hidden away,” which negates their impact on the planet. This can be done in many ways, including planting trees (reforestation), storing carbon in manufactured devices, or capturing methane at landfills.

Independent companies develop carbon offset projects and pull and store GHG emissions from the atmosphere. Then they sell those offsets to companies that emit (or have emitted) GHGs.

When you hear “carbon offset,” think about the term “compensation.” Offsets represent the reduction, avoidance, destruction, or sequestration of the equivalent of a ton of carbon in one place to offset or “compensate” an emission taking place somewhere else.


The term "carbon credit" refers to a tradable certificate or permit that shows a company, industry, or country has paid to remove a certain amount of carbon dioxide from the atmosphere. 

They are a way to control greenhouse gas emissions created by an international treaty to combat climate change. Under the pact, countries receive carbon credits based on their historical emission levels. They could then trade these credits among themselves to meet their targets.

This system is supposed to incentivize countries to reduce their emissions. For example, a company or country with a high emission output could purchase credits from one with a lower emission output.

When you hear “carbon credit,” think about the term “allowance.” Carbon credits represent the maximum amount of GHGs an entity is allowed to emit.


Although there are apparent differences between offsets and credits, they also share similarities, the most important being their shared goal of combatting the climate crisis. While they aren’t perfect, they are some of the most effective tools we currently have and need to be further scaled if we want a chance at a sustainable future.

If you’re interested in becoming part of that future, consider subscribing below and offsetting your emissions today.