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Carbon Offsets vs. Carbon Credits: A Breakdown

Jane Marsh - May 6, 2024

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Carbon offsets vs. carbon credits have been a continued conversation in eco-conscious discourse since their inception. Unfortunately, a lot of murkiness and controversy surrounds these concepts for several reasons. Many do not understand the difference, and agencies offering these services and incentives to make their enterprise greener may not be executing the ideal to its full potential. Learn more about the intricacies to be a more informed environmental steward.

Definitions of Essential Terms

Let’s analyze the differences between carbon offsets vs. carbon credits — what are they, and, more importantly, what are they not? What do they both have in common is they are ways to hold people and entities accountable for their carbon footprint.


Carbon Offsets

Carbon offsets are an umbrella term for numerous methods, both natural and mechanical, to offset carbon emissions. More times than not, they are unrelated to the project an entity is trying to offset. 

For example, an e-commerce business desires to minimize the impact of its shipping. Instead of decarbonizing their transportation or looking into recycled materials, thereby making their shipping process inherently greener, the company looks elsewhere. Maybe it doesn’t want to change how they ship because it’s cheap and fast. 

Instead, they fund a project to restore a wetland because it naturally captures carbon. The logic here is the wetland carbon capture offsets the negative impact shipping causes because the company is engaging in environmental rehabilitation. Most carbon offsetting projects manifest this way or through planting trees — you may have seen options to add a dollar or two to your shipping fee to help fund these initiatives.

Another option is mechanical outlets, which usually occur through investments. Instead of restoring wetlands, the e-commerce company could invest part of its profits into renewable energy startups or academic research for green technologies. This is offsetting, too.

Carbon Credits

Carbon credits are allowances for owners of the permit to produce a specific amount of carbon dioxide. Usually each credit represents one metric ton of carbon dioxide emissions. Credits place a maximum on companies that previously released emissions flippantly. In a way, these credits are a pseudo-offset. 

Credits are a way to loosely tax high-emitting producers. They are exchanged through a cap-and-trade program. Additionally, it incentivizes corporations to cut back because they typically have the option to sell credits back to the permitting organization. They lower their footprint and save on their budget — it’s a win-win.

Controversies With Carbon Offsets vs. Carbon Credits

These all sound ideal — they are simple systems that make companies more aware of their footprints, leading to a more sustainable future. Are they as effective as the elevator pitches make them sound? 

art of carbon emissions

Carbon Credits

Let’s start by peeling away oversights with carbon credits. Though the permits are not cheap, they are not as much of a cap as environmentalists want. The top-earning corporations worldwide are the most damaging to the atmosphere and biodiversity. This comes with perks, such as nearly infinite money to repeatedly purchase carbon credits. 

Though this “tax” may go to other eco-friendly causes, it’s only a mild slap on the wrist compared to the repercussions these companies need. Usually, these Fortune 500 companies will produce emissions, business as usual, without changing their behaviors. They only need to buy more credits, which doesn’t tackle the core of the problem.

Carbon Offsets

Carbon offsets are another nuanced conversation. The primary way companies offset emissions is through tree-planting. Ignoring other techniques for a second, there is a lot to unpack here. Most tree-planting organizations that partner with companies replace deforested areas with quick-growing pine. The faster they grow, the more carbon they capture sooner, right? Well, the pine is inexpensive for the planters, and it hurts ecosystems in the long run.

Pine is not the native tree in every corner of the world. Planting foreign species in these areas disrupts the nutrient density of the soil, invites invasive species, and prevents the habitat from gaining the resources it needs from the previously native trees. Carbon offsetting companies must prioritize planting native flora to adequately restore and reinforce destroyed regions.

When it isn’t about trees, the carbon offsets are usually in the wrong place anyway. Consider a fast fashion company that saps the region’s aquifers of freshwater to make garments that inevitably go to landfill. In an attempt to greenwash customers, they have a carbon offset program where, for an upcharge to the customer, they can donate to local trash cleanups. 

This is problematic because the root problem is excessive water use that harms the environment and its people, resulting in poverty and biodiversity stress. Shouldn’t the offsets tackle these issues more pressingly, instead of funding volunteers near a single office building to do a weekend cleanup?

plant emissions

Fixing Carbon Accountability Systems

How can regulating bodies refine credits and offsets to make them more impactful and meaningful? Reform is necessary. Many nations have climate crisis-related promises in place, but what systems are supporting these prospects?

Some suggest paying companies for comprehensive carbon transformations instead of encouraging investing in smaller projects. Corporations awarding funds must have it go directly to the entity needing to reduce emissions, and it must prove it utilized those funds for these efforts.

However, the most significant change required is a need for strict, mandatory participation in achieving net-zero goals instead of having it be voluntary with carbon credit and offset programs. These projects must have stringent oversight and regular auditing, asking companies to provide transparent insights into their goals and progress in achieving eco-goals.

Carbon Offsets vs. Carbon Credits for the Future

Carbon offsets and credits are well-intended inventions to decarbonize the world and change its behaviors. Theoretically, it should have transformed humanity’s habits. It might have, but it didn’t present the long-lasting, widespread solution that the planet needed to heal rapidly.

Instead, these systems were learning opportunities. They are a pathway to bigger and better green projects. The evolution of carbon offsets and credits will a focal point to corporate social responsibility, transforming how every business operates worldwide.

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About the author

Jane Marsh

Starting from an early age, Jane Marsh loved all animals and became a budding environmentalist. Now, Jane works as the Editor-in-Chief of where she covers topics related to climate policy, renewable energy, the food industry, and more.