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Carbon neutral, carbon offsets and carbon credits, explained

May 05, 2022
topic:Air Pollution
tags:#carbon neutral, #carbon credits, #carbon offsets, #greenhouse-gas emissions, #greenwashing
located:USA, China, United Kingdom
by:Gerardo Bandera
In order to achieve the IPCC target of reducing GHG emissions to prevent the devastating consequences of a 1.5 degree Celsius rise in global temperature, many companies and countries are focused on moving towards carbon neutral models. With many similar terminologies being used, it’s important for consumers and citizens to understand what this means and how many of these terms are used as greenwashing marketing phrases.

What is Carbon neutral?

Put simply, carbon neutral means that an organisation offsets the carbon it admits by reducing the same amount of carbon from the atmosphere. Carbon neutral does not mean that the organisation does not pollute or emit carbon dioxide, just that it ensures it sequesters an equal amount of carbon through the various methods we’ll discuss below. The net carbon footprint is therefore zero. 

What’s the difference between carbon neutral, net zero and climate neutral?


Net Zero is used to describe the state when all greenhouse gasses emitted in the world are balanced and sequestered from the atmosphere. The Paris Agreement stresses the need for the world to be net-zero to prevent the consequences of GHG emissions on global warming. 


As opposed to carbon neutral, carbon free is used when a product or organisation does not emit any carbon in the first place; however, unless it is specified, it may emit other GHGs. A building that runs exclusively on renewable energy sources, such as solar or wind, emits no CO2 from its energy consumption, and is therefore carbon-free since it does not have to offset any carbon emissions.

Climate neutral

Climate neutral means that the company offsets not only all of its carbon emissions, but also all other GHG emissions while also undoing any other negative impacts on the environment. 

Can a company be carbon negative?

An organisation can label itself or a product carbon negative when it offsets more carbon than it emits. The organisation would have to calculate its total carbon footprint and take out more carbon from the atmosphere than its total emissions. After calculating its total carbon footprint, the organisation would have to remove more carbon from the atmosphere than the total.

What types of carbon offsets exist?

Crucially, it is important to understand that one can achieve carbon neutrality in two ways: by reducing total carbon emissions, and/or by increasing carbon offsets to match carbon emissions. Carbon offsets can take two main forms.

Removal of carbon from the atmosphere

The most common type of carbon offset seeks to extract carbon from the atmosphere (called carbon sequestration) in order to prevent the warming effects of this greenhouse gas. Reforestation or afforestation (planting trees where there were none previously) are the most common projects, as trees naturally sequester carbon for photosynthesis and store them in biomass or in soil.

However, trees will also release carbon at the end of life, either from natural causes or from deforestation. Other manmade carbon removal methods are beginning to arise, but they tend to be more costly and more energy-consuming.

Preventing future GHG emissions

This type of carbon offset supports projects that replace carbon-emitting activities with more environmentally-friendly alternatives, typically targeting energy production and consumption. For example, some preventative carbon offsets will provide improved cookstoves to communities that use traditional woodstoves, therefore reducing the amount of firewood needed to use (which emits carbon both by burning and by deforestation).

What is a carbon credit?

In certain countries or sectors that are pushing for reduced and efficient GHG emissions, organisations may be granted carbon credits. A carbon credit is an allowance for carbon emissions which, if not used fully, can be sold or traded on the carbon market. 

For example, a company that switches to using a renewable energy source may have leftover available emisions, which it can trade or sell to another organisation that needs to emit more carbon than permitted with its available carbon credits.

Carbon credits seek to balance GHG emissions by investing in carbon offsets that reduce atmospheric GHGs. Carbon credits are intended to control the total amount of GHG emissions by the private sector, but they can be problematic when companies, instead of reducing their overall emissions, purchase more carbon credits to justify their environmentally-noxious activities.

There have also been many cases of carbon credit fraud, in which companies have been found guilty of double-counting credits, or purchasing unvetted credits. 

Are carbon offsets greenwashing?

Carbon offsets are intended to compensate for the negative effects of GHG emissions by providing people and organisations with an opportunity to ‘reverse’ the damage of their actions. However, many companies have taken advantage of this green vocabulary to attract consumers with increased environmental awareness and shopping habits - without making the necessary changes to their carbon emissions. 

Fossil fuel companies, for example, have begun to claim they are carbon neutral simply by bundling carbon offsets with their deleterious products. Journalists and scientists have found that organisations that evaluate the supposed prevented carbon emissions often use questionable methods, therefore overestimating the true impact of the carbon offsets.

Climate scientists have also raised the alarm that, since humans have not yet developed the technology to sequester enough carbon from the atmosphere, we are expecting forests to sequester more carbon than is possible. Moreover, the carbon absorbed by these natural carbon sinks does not remain stored forever; as mentioned earlier, this carbon is released again to the atmosphere at the end of life. 

Finishing thoughts

While carbon offsets and carbon neutral organisations are a good start at preventing some of the damage done to the environment by human activities, we cannot fully depend on them to prevent the devastating consequences of the climate crisis.

True action requires reducing GHG emissions to manageable levels by reducing our investment in fossil fuels, modifying our diets and living more eco-friendly lifestyles.

Image by Waren Brasse

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Gerardo Bandera
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USA China United Kingdom
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