Carbon Offsets Explained

What are carbon offsets?

A carbon offset represents the reduction or removal of carbon dioxide (CO₂)—or its equivalent in other greenhouse gases (GHGs)—to balance or offset carbon emissions made elsewhere.

For example, if you take a flight that creates carbon emissions, you can buy a carbon offset to support a project that plants trees or builds clean energy, which helps absorb or prevent the same amount of emissions.

Likewise, the carbon emissions resulting from a company’s products, services, or operations can be offset by purchasing a quantity of offsets that support environmental projects at scale.

History of carbon offsets

Carbon offsets got their start in the late 1980s and early 1990s as global concern about climate change grew.

The concept became more formalized with the 1997 Kyoto Protocol, a global agreement made by many countries to reduce their GHG emissions.

The Kyoto Protocol introduced a system, called the Clean Development Mechanism (CDM), that allowed industrialized countries to invest in emission-reducing projects in developing nations and then buy or trade carbon credits from these projects. This laid the groundwork for today’s carbon markets.

Since then, carbon offsetting has grown into a worldwide system. Individuals, companies, and governments all use carbon offsets to reduce their carbon footprint and support environmentally-friendly projects.

How do carbon offsets work?

Carbon offsets are created when a verified project (e.g. tree planting or renewable energy) reduces or removes GHG emissions.

A carbon offset is typically equivalent to one metric tonne of carbon dioxide or its equivalent in other greenhouse gases (e.g. methane, nitrous oxide, and hydrofluorocarbons). The unit of measurement for a carbon offset is tonnes of carbon dioxide equivalent (tCO₂e). Each tonne of reduced emissions generates one carbon credit.

Carbon projects are monitored and verified by third parties to ensure the emissions reductions are real and measurable. Once verified, the credits can be sold on carbon markets.

Individuals, companies, governments, and organizations then buy carbon credits to offset their carbon footprint, which is the greenhouse gas emissions resulting from a particular activity, whether it be daily operations or a specific product or service.

Watch the video below to learn how financing high-quality carbon projects around the world that reduce and remove emissions is a high-impact, immediate, and measurable solution to tackling climate change.

Terminology

Carbon credits vs. carbon offsets: While similar and often used interchangeably, there is a distinction between the terms. A carbon credit is a certified unit that can be bought, sold, or traded. It is a currency. A carbon offset is a more general term, referring to the product that results from a carbon project for the purpose of offsetting a footprint.

Carbon offsets vs. carbon offsetting: Carbon offsets are a product. Carbon offsetting refers to the act of using offsets to reduce your carbon footprint.

Carbon removal vs. carbon offset: Carbon offsets are generated from different types of projects that either remove carbon dioxide from the atmosphere, like tree planting projects that trap CO₂, or avoid carbon emissions from happening, like using renewable energy in place of traditional non-renewable energy. Carbon removals refer to just the offsets or credits that result from carbon removal projects like tree planting, direct air capture, and blue carbon. Removals are a type of offset. 

Do carbon offsets benefit the environment?

Yes, carbon offsets benefit the environment, if they are done well and come from high-quality projects. In addition to reducing the amount of CO₂ in the atmosphere, carbon offsets protect endangered wildlife habitat, support biodiversity, and improve air and water quality. 

How do carbon offsets reduce carbon dioxide (CO₂)?

Carbon offsets support a variety of projects that sequester CO₂ in different ways. Here are a few examples:  

• Tree planting and forest protection and restoration: Trees naturally absorb carbon dioxide from the atmosphere. This stored carbon stays in the tree for as long as it lives. That’s why forests are called carbon sinks—they naturally remove and store carbon from the atmosphere, helping slow down climate change.
• Renewable energy: Traditional fossil fuel energy sources like coal, oil, and natural gas release CO₂ when burned to make electricity. Replacing these fossil fuels with renewable sources, like solar, wind, hydro, and geothermal, which generate electricity without releasing CO₂, helps cut down the amount of CO₂ going into the atmosphere.
• Technological approaches: Technological approaches to reducing carbon dioxide focus on engineered systems to capture, remove, or store CO₂. One example is direct air capture, which uses machines to pull CO₂ directly from the air. The captured CO₂ can be stored underground or used in products like building materials or fuels.
  

Can carbon offsets help climate change?

Yes, carbon offsets can help fight climate change. But offsets alone will not solve the climate crisis. They are a useful tool when paired with serious efforts to cut emissions at the source. Offsets allow us to take action for unavoidable carbon emissions we produce today, while we transition to a lower carbon future. 

What is a carbon offset project?

A carbon offset project is an activity that reduces, removes, or avoids carbon dioxide or other greenhouse gases from the atmosphere in a way that can be measured, verified, and credited. Carbon sequestration projects can be divided into several main categories based on the method they use to reduce, remove, or avoid emissions. 

Types of carbon offset projects 

Nature-based solutions use natural ecosystems to absorb or prevent carbon emissions. 

• Afforestation and reforestation: Planting trees in areas that were previously deforested or not forested.
• Blue carbon: Focused on coastal and marine ecosystems, like sustainable aquaculture and restoring mangroves, seagrasses, and seaweeds.
• Forest conservation (REDD+): Preventing the cutting down of forests that store carbon.
• Grasslands: Conserving and restoring prairies, plains, and savannahs which store carbon in underground root systems.
• Improved forest management (IFM): Adopting more sustainable forestry practices to increase the amount of carbon they store.
• Wetland and peatlands: Rewetting drained and damaged wetlands to prevent large carbon releases.
• Soil and agriculture: Changing agricultural practices to store more carbon in the soil. 

Renewable energy projects replace fossil fuel energy sources with cleaner alternatives. 

• Wind power 
• Solar power 
• Hydro power 
• Geothermal energy: Using the Earth’s underground reservoirs of steam and hot water to produce power and heat. 
• Biomass energy: Using organic materials, such as wood, crop residues, or other plant and animal waste, as fuel. 

Energy efficiency projects reduce the energy needed to do the same work, resulting in fewer emissions. 

• Efficient cookstoves: Replacing open-fire cooking that uses wood or charcoal with low-emission stoves that use cleaner burning fuels.
• Energy-efficient lighting or appliances: Replacing incandescent bulbs or outdated appliances with efficient alternatives such as LED lighting or Energy Star–rated devices. 
• Industrial efficiency improvements: Upgrading equipment, processes, or systems in factories and industrial facilities to use less energy or produce fewer emissions. 

Technology-based solutions use engineered or industrial methods, rather than natural processes, to reduce or remove greenhouse gas emissions. 

• Direct air capture (DAC): Machines pull carbon directly from the atmosphere and store it underground. 
• Carbon capture and storage (CCS): Trapping carbon from industrial sources, like power plants, factories, and refineries, before the emissions enter atmosphere, and then storing it underground.
• Methane capture and destruction: Capturing methane, a potent greenhouse gas, from various sources, like landfills, wastewater, and farms, and using it as energy instead of letting it enter the atmosphere.
  

What are the co‑benefits of offset projects? 

Co-benefits are the positive side effects that a carbon project provides, beyond removing or reducing emissions.  

Environmental co-benefits can include improving biodiversity, restoring ecosystems, reducing air pollution, and improving soil and water quality.  

Carbon offset projects can also affect local communities through social co-benefits: creating jobs, improving health though cleaner air and clean water, providing reliable and affordable energy, building climate resilience, and supporting education and community development. Strong project standards help ensure communities are consulted and receive fair benefits from climate projects. 

Are offsets from forestry projects better than renewables? 

There is not one type of carbon project that is better than the other. Carbon projects serve difference purposes, and their value depends on what you are trying to accomplish. 

For example, forestry offsets are best for balancing past or unavoidable emissions, since they actively remove carbon from the atmosphere and often deliver added co-benefits like biodiversity protection and community support. Renewable energy offsets are useful for reducing future emissions by replacing fossil fuels, especially in regions where renewable projects need financial support to move forward.  

Many organizations manage a portfolio of offsets that mix different project types to address different parts of their carbon footprint.

Quality and standards

How are carbon offset projects audited and verified? 

Carbon offset projects are audited and verified by independent, third-party organizations that use a set of key criteria to assess the quality of the offsets. The main criteria include: 

• Additionality: The project’s carbon reductions would not have happened without the offset funding. It is not “business as usual.” 
• Measurability: The emission reduction or removal must be quantifiable using approved methodologies. 
• Permanence: Carbon benefits cannot be temporary. This is ensured through long-term monitoring, legal protections, regular audits, risk management, and buffer pools of extra credits to replace any carbon lost from events like fires or deforestation. 
• Verification: Independent, accredited auditors must validate the project’s design and verify its results regularly. 
• No double counting: Credits must be tracked in a registry to ensure no one claims the same reduction twice. 
• Transparency and traceability: Documentation, monitoring, and credit transactions must be publicly accessible. 
• Sustainable development and stakeholder safeguards: Projects can’t harm local communities or ecosystems and often must demonstrate social and environmental co-benefits. 
• Leakage management: The project prevents or accounts for emissions shifting elsewhere. 

Companies, governments, and individuals know they are supporting a high-quality carbon offset project if it adheres to these criteria. These checks help confirm the offset is credible and contributes to genuine climate impact.

At Climate Impact Partners, we have developed a leading-edge in-depth quality assurance process that goes beyond industry requirements and continually evolves to set best practices. Watch the video below to learn more.

What are the standards or certifications for carbon offsets?

The most widely recognized standards and certifications for carbon offsets include:

• Verified Carbon Standard (VCS, by Verra): Covers a wide range of project types like forestry, renewable energy, and carbon capture.
• Gold Standard: Focuses on high-quality projects with strong environmental and social co-benefits, often in developing countries.
• Climate Action Reserve (CAR): A North American standard with rigorous protocols, especially for forestry, landfill gas, and industrial projects.
• American Carbon Registry (ACR): One of the oldest registries, used widely in the U.S. for voluntary and compliance markets.
• Plan Vivo: Specializes in community- and land-based projects, with strong emphasis on local stakeholder benefits.

Who verifies carbon offsets?

Carbon offsets are verified by independent, accredited third-party auditors, often called validation and verification bodies (VVBs), that are approved by the carbon standard overseeing the project (like Verra, Gold Standard, or Climate Action Reserve).

These auditors validate the project design, ensuring it meets the standard’s rules before it starts, and verify the actual emission reductions or removals by reviewing data, visiting sites, and confirming the results are accurate.

Markets, policy & regulation

Voluntary carbon market and compliance market

The carbon market is divided into two parts: the voluntary carbon market (VCM) and the compliance (or regulated) market.

The voluntary carbon market is used by companies and individuals who want to buy carbon credits voluntarily to meet sustainability or climate goals. The VCM is not regulated by governments, and prices and project types vary widely.

The compliance market is used by governments, companies, industries, and entities who are legally required to limit emissions under government programs. Governments set a cap on emissions and let companies use a limited number of carbon offset credits or allowances to meet targets.

Examples of compliance markets include:

• EU Emissions Trading System (EU ETS): The world’s largest carbon market, where power plants, factories, and airlines in the EU must have credits or allowances for every ton of carbon they emit; the cap on credits shrinks over time to drive emissions down.
• California Cap-and-Trade Program: A state-run system covering power plants, fuel suppliers, and large industries, where companies must hold allowances or approved offsets for their emissions under a gradually tightening cap.
• CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation): A global program requiring airlines to offset growth in their international flight emissions above 2019 levels by purchasing eligible carbon credits.
  

Paris Agreement and Article 6

In 2015 at the UN climate change conference in Paris, nearly every country in the world adopted a global treaty to limit global warming to well below 2°C above pre-industrial levels, and ideally to 1.5°C, by cutting greenhouse gas emissions. This is known as the Paris Agreement. The Paris Agreement provided a universal framework for reducing emissions, adapting to climate impacts, and providing climate finance.

Article 6 of the Paris Agreement outlines how countries can cooperate to meet their climate goals through market and non-market mechanisms:

• Article 6.2: Cooperative approaches: Allows countries to enter into bilateral or multilateral agreements to trade Internationally Transferred Mitigation Outcomes (ITMOs), or carbon credits, to help meet their official climate action plans, also known as Nationally Determined Contributions (NDCs), with rules to avoid double counting.
• Article 6.4: UN-run carbon market: Establishes a centralized system (often compared to the Clean Development Mechanism from the Kyoto Protocol) where projects that reduce or remove emissions can generate credits, which countries or companies can buy.
• Article 6.8: Non-market approaches: Focuses on cooperation without carbon trading, such as technology transfer, finance, and capacity building to help countries cut emissions.

Article 6 of the Paris Agreement helps make international carbon markets more transparent, standardized, and credible, which affects how credits are created, tracked, and used across both compliance and voluntary systems.

What is a carbon offset registry, and how does it work?

A carbon registry is a system that tracks carbon offset projects and the credits they generate to ensure transparency and prevent double counting.

A carbon offset project is first registered with an approved standard, like Verra or Gold Standard. Once the project is verified by an independent auditor, credits are issued. Each credit gets a unique serial number and is listed in the registry’s database. When the credit is used, it is “retired,” and it cannot be resold or claimed by anyone else.

Registries like Verra or Gold Standard are international registries and track credits from projects worldwide, usually for the voluntary carbon market.

National registries are run by governments to track credits used toward a country’s climate targets (NDCs).

Trading in carbon markets

Carbon credits can be traded in both voluntary and compliance carbon markets. Carbon trading allows credits to flow to where they’re most valued, helps set a market price for carbon, and creates financial incentives for companies to cut emissions.

In the VCM, credits can be sold between brokers, exchanges, or buyers. A credit is retired when the buyer wants to claim it toward a footprint or other climate goal.

In compliance markets, regulated entities (like power plants or airlines) can trade carbon credits or allowances to meet legal emissions caps. For example, in systems like the EU ETS or California Cap-and-Trade, companies can buy extra allowances if they emit more than their cap or sell unused ones if they reduce emissions below their limit.

How much do carbon offsets cost and how is the price of carbon offsets determined?

Carbon pricing varies widely and can range from a few dollars to over $100 per ton. The price is determined by several factors:

• Project type: Projects that physically remove carbon from the atmosphere (often called removal offsets), like some nature-based solutions or direct air capture, are more expensive because they are harder to scale. Projects that avoid or reduce carbon (often called avoidance or reduction offsets), like renewable energy or methane capture, are usually less expensive because they prevent, but don’t remove, existing carbon dioxide.
• Certification and standards: Offsets verified by trusted standards (Verra, Gold Standard) or used in compliance markets often command higher prices due to stricter oversight.
• Co-benefits: Projects that deliver social or environmental co-benefits tend to be priced higher.
• Market dynamics: Prices also reflect supply and demand. As companies set net-zero targets and regulations expand, demand rises, pushing prices up.
• Geography and scale: Projects in developing regions or with lower operating costs can be cheaper, while small-scale projects are usually more expensive per ton.

Where does carbon offset money go?

Money from carbon offsets supports several aspects of a project. It helps fund the development and ongoing operation of the project, including paying local workers. Funds also cover verification and certification fees required by standards and registries.

In many cases, the money provides community benefits such as education or infrastructure improvements. When applicable, a portion goes to brokers or platforms that connect buyers with offset projects.

Are carbon offsets tax deductible?

For individuals, carbon offsets are generally not tax deductible, unless they are purchased from a registered charity or nonprofit organization and the payment is considered a donation rather than a fee for a product or service.

Businesses can usually deduct carbon offsets if they are directly related to business operations, branding, or sustainability goals. Businesses can also purchase offsets from charities and nonprofits and claim them as a charitable donation.

Overall, deductions depend on the country’s tax laws, the type of organization selling the offsets, and if the payment is a donation or a purchase.

What are the risks of double counting in global offset systems?

Double counting happens when the same offset or credit is claimed by more than one entity. This matters because double counting inflates the amount of actual climate progress and undermines trust in carbon markets.

For example, if a carbon project takes place in one country, but a company or another country buys the credit from that project, there is a risk that both entities might count the same offset toward their climate targets.

Article 6 of the Paris Agreement introduced rules like corresponding adjustments, requiring host countries to subtract sold credits from their own NDC totals so they can’t be claimed twice.

Centralized registries, clear rules on how credits can be claimed, and transparent reporting can all help prevent credits from being double counted.

How do retroactive credits for past emissions work, and are they valid?

Retroactive credits are offsets issued for emission reductions or removals that have already occurred, often years before the credit is sold. For example, a project might restore a forest in 2020 but only get certified and issue credits in 2024, representing the carbon sequestered between 2020-2023.

Registries like Verra or Gold Standard review data to confirm how much carbon was reduced or removed during a past period. Once that is verified, credits are issued for the historical impact.

Retroactive credits are valid. Most major registries allow retroactive credits, provided there’s strong documentation, including monitoring reports, satellite data, and third-party audits. These credits are considered valid and tradable.

What is the United Nations Carbon Offset Platform?

The United Nations Carbon Offset Platform grew out of the Kyoto Protocol and is an online marketplace run by the UN where individuals, companies, and organizations can buy certified carbon credits from Clean Development Mechanism (CDM) projects.

While this UN platform continues to support voluntary offsetting, its role is expected to shrink. Under Article 6.4 of the Paris Agreement, a new UN‑governed carbon crediting mechanism is being established— the Paris Agreement Crediting Mechanism (PACM), also referred to as the Article 6.4 mechanism or A6.4ER system.

How businesses and organizations are using carbon offsets

Why do companies buy carbon offsets?

Companies buy carbon offsets to minimize their impact on the environment and help decrease carbon footprints. Offsets allow companies to meet climate targets (like net zero or climate neutrality), comply with regulations (if applicable), and improve their sustainability image.

How do carbon offsets help companies achieve net zero?

Carbon offsets help companies achieve net zero by filling the gap between the emissions they can reduce directly and those they can’t yet eliminate. Most companies first cut emissions through steps like switching to renewable energy, improving efficiency, and changing operations. For any remaining emissions, they buy carbon offsets or even invest in carbon offset projects.

Companies use two main types of carbon offset credits, often combining both.

Carbon reduction credits come from projects that avoid or reduce emissions compared to what would have happened otherwise. These don’t remove carbon already in the atmosphere but prevent extra emissions. Examples include wind or solar farms, capturing methane from landfills, or protecting forests from deforestation.

Carbon removal credits come from projects that take carbon dioxide out of the atmosphere. These are increasingly important for long-term climate strategies because they are seen as more permanent. Examples include restoring or planting new forests, soil carbon sequestration, and direct air capture (DAC).

Increasingly, standards like the Science Based Targets initiative (SBTi) and other net zero frameworks expect companies to have a growing share of removal credits—especially for offsetting the last, hardest-to-cut emissions by 2050.

Who is the largest purchaser of carbon offsets?

The largest purchasers of carbon offsets are typically large corporations in sectors with high emissions or whose emissions are particularly challenging to reduce. These include:

• Energy and oil & gas: Burning fossil fuels for energy production and transportation creates large amounts of CO₂. Transitioning away from oil and gas is slow and costly.
• Aviation: Planes burn large amounts of jet fuel, and there are few low-carbon alternatives for long-haul flights.
• Technology companies: Data centers and cloud services use massive amounts of electricity, and supply chains generate emissions.
• Consumer goods and retail: Large global supply chains, manufacturing, packaging, and product transportation lead to significant carbon footprints.
• Finance and investment firms: Their portfolios often include high-emitting industries, so they offset to balance financed emissions and meet ESG goals.
  

Can small businesses or consumers affordably use carbon offsets?

Small businesses and consumers can affordably offset their emissions by purchasing credits in small amounts through reputable providers, often for just a few dollars per ton.

Providers can calculate carbon footprints for you and then allow you to offset that footprint or offset specific activities—such as flights or home energy use—rather than the entire footprint.

Other options for individuals or small businesses include choosing bundled options through airlines, utility companies, or online platforms that add offsets at checkout, and subscribing to monthly offset programs that make it easy to neutralize household or business emissions.

Effectiveness and criticisms

Are carbon offsets effective? Do they really work?

Carbon offsets can be effective when they are high-quality and properly verified.

Offsets “work” by funding carbon projects that reduce or remove greenhouse gases. Scientifically, many types of offset projects are proven to reduce or store carbon. For example, trees absorb carbon dioxide as they grow, and methane capture systems prevent potent greenhouse gases from entering the atmosphere.

The effectiveness of offsets depends on strict criteria, such as additionality, permanence and verification by credible third parties. Poor-quality offsets, or those with weak oversight, can fail to deliver real climate benefits.

Can carbon offsets be reversed (e.g., through forest fires)?

Some carbon offsets, particularly those involving natural carbon storage like forests, can be reversed if the carbon is released back into the atmosphere. For example, if a forestry project burns in a wildfire or is cleared illegally, much of the stored carbon is released.

Credible carbon offset programs build in safeguards to reduce this risk. Buffer pools or insurance reserves set aside a percentage of credits to cover unexpected carbon losses. Projects must also meet durability requirements that demonstrate long-term storage, which is monitored and verified.

While nature-based projects can carry reversal risks, technological approaches (like carbon capture and storage) generally store carbon more permanently.

Why are carbon offsets sometimes controversial?

Carbon offsets are sometimes controversial because their quality and impact can vary widely, and they are occasionally used in place of making real emissions cuts. Critics point out that some offsets fail to deliver lasting or additional carbon reductions, may be double-counted or poorly verified, and can sometimes negatively affect local communities. There is also concern that companies may use offsets to appear carbon neutral while avoiding deeper changes—raising the risk of greenwashing.

Oversight of carbon offsets does face challenges, but improvements are underway. Certification programs help verify projects, though standards still vary. Greater global coordination, stronger monitoring—especially for nature-based projects—and better data transparency are key to building trust. Aligning methodologies across registries and improving accountability can ensure offsets are more reliable and effective.

Are carbon offsets greenwashing?

Carbon offsets are not inherently greenwashing, but they can become greenwashing if they’re used poorly. Greenwashing happens when companies use offsets as a marketing or PR tool to claim they are carbon neutral or net zero without making significant efforts to reduce their own emissions. This can give the impression of climate action while allowing pollution to continue.

Relying heavily on offsets instead of reducing emissions, using offsets of poor quality, and lacking transparency about how offsets are used all contribute to the perception of greenwashing.

Offsets themselves can deliver real climate benefits if they meet strict standards. When used responsibly, offsets are meant to complement a company’s direct emissions cuts, not replace them.

Are carbon offsets ethical?

Carbon offsets can be ethical when they genuinely reduce or remove emissions, are independently verified, and deliver tangible benefits to local communities.

However, they become far more complex when their impacts on Indigenous rights, land use, and social and environmental justice are considered.

Some land-based projects, such as large-scale forestry initiatives, have been criticized for infringing on Indigenous territories, restricting local communities’ land access, or being implemented without free, prior, and informed consent (FPIC). These practices can displace people or threaten livelihoods, perpetuating historical inequities.

Offsets also raise justice concerns when big emitters, often in the Global North, use them to keep emitting while the burden of land-use changes falls on vulnerable communities, especially in the Global South.

Ethical offsets must:

• Respect Indigenous and community rights through FPIC and fair benefit-sharing.
• Avoid land grabs or restrictions that undermine livelihoods.
• Address social and environmental justice so climate action does not disproportionately harm marginalized groups.
• Ensure transparency and accountability alongside environmental integrity.
  

Future trends and innovations

What emerging technologies are shaping the offset space?

Several emerging technologies are shaping the carbon offset space by improving the accuracy, transparency, and integrity of offset projects, and by enabling new forms of carbon removal. These innovations are helping address longstanding concerns about quality and accountability in offset markets.

Digital monitoring and verification: Satellites, drones, and sensors now provide near real-time data on forest cover, biomass, soil carbon, and land use. IoT (Internet of Things) devices and advanced field tools enhance long-term monitoring and boost transparency.

Blockchain and digital MRV (monitoring, reporting, verification): Blockchain technology improves offset transparency and traceability by creating tamper-proof records for carbon credits, reducing double counting. Digital MRV platforms automate monitoring, reporting, and verification to improve efficiency and consistency.

AI and machine learning: AI tools assess project performance, estimate carbon storage, and predict risks like wildfire or non-permanence. They also automate carbon accounting from satellite and sensor data.

Engineered Carbon Dioxide Removal (CDR): Direct Air Capture (DAC), biochar, and enhanced weathering offer durable, measurable carbon removal options with high-integrity credit potential.

Digital marketplaces and APIs: Platforms like Patch, KlimaDAO, and Ceezer make it easier to access verified credits and integrate offsetting into business models via APIs.

Evolving regulatory frameworks

Regulatory frameworks for carbon offsets are evolving quickly to improve quality, transparency, and accountability in both voluntary and compliance markets.

A major focus is on establishing global standards, with initiatives like the Integrity Council for the Voluntary Carbon Market (ICVCM) developing Core Carbon Principles to define what constitutes a high-quality credit.

At the same time, the Voluntary Carbon Market Integrity Initiative (VCMI) is guiding companies on how to responsibly use offsets in their climate strategies.

Internationally, Article 6 of the Paris Agreement is introducing a more formal structure for trading carbon credits between countries, with built-in safeguards to prevent double counting and ensure that emissions reductions are accounted for accurately at the national level.

National and regional regulations are also becoming more robust, including refining how offsets can be used in compliance markets and increasing scrutiny of corporate climate claims.

There is also growing attention on environmental and social safeguards. Newer frameworks are incorporating stronger protections for Indigenous rights, biodiversity, and local communities to ensure offset projects are ethical and inclusive. Regulators are also encouraging the use of digital tools, open data standards, and improved monitoring and verification systems to strengthen oversight.

Consumer and investor expectations

Consumer and investor expectations around carbon offsets are rising, with growing demand for transparency, credibility, and real climate impact. Both groups increasingly expect companies to prioritize actual emissions reductions and use only high-quality, verified offsets for any remaining emissions.

There is heightened scrutiny of vague claims like carbon neutral, and a preference for offsets that involve carbon removals rather than reductions or avoidance. Investors are also integrating offsets into broader ESG and climate risk strategies, viewing low-quality credits as potential reputational or financial liabilities. Overall, stakeholders are pushing companies toward more responsible, transparent, and science-aligned offset practices.