The terms carbon offset and carbon offset credit (or simply “offset credit”) are used interchangeably, though they can mean slightly different things.
A carbon offset broadly refers to a reduction in GHG emissions – or an increase in carbon storage (e.g., through land restoration or the planting of trees) – that is used to compensate for emissions that occur elsewhere.
A carbon offset credit is a transferable instrument certified by governments or independent certification bodies to represent an emission reduction of one metric tonne of CO2, or an equivalent amount of other GHGs.
The purchaser of an offset credit can “retire” it to claim the underlying reduction towards their own GHG reduction goals.
Establishing a common denomination for different greenhouse gases CO2 is the most abundant GHG produced by human activities, and the most important pollutant to address for limiting dangerous climate change.
However, human beings create and emit numerous other GHGs, most of which have a far greater heat-trapping effect, pound for pound, than CO2.
The most prevalent of these gases are methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), per fluorocarbons (PFCs), nitrogen trifluoride (NF3), and sulfur hexafluoride (SF6).
Fully addressing climate change will require reducing emissions of all GHGs. Scientists and policymakers have established “global warming potentials” (GWPs) to express the heat-trapping effects of all GHGs in terms of CO2-equivalents (annotated as “CO2e”).
This makes is easier to compare the effects of different GHGs and to denominate carbon offset credits in units of CO2-equivalent emission reductions.