Guide to Carbon Credits (Carbon Offsets)

Quick answers to your questions about carbon offsetting.

More resources:

Contact us for our plain English guide to carbon credits and carbon neutrality.

See our carbon glossary and carbon acronyms.

What is a carbon credit?

One carbon credit either prevents greenhouse gases (GHG) or sequesters GHG removal from the atmosphere. Either way a carbon credit denotes a business-as-usual baseline: one carbon credit equates to one tonne of CO2-e, or carbon dioxide equivalent.

Put another way, a tonne of carbon is either prevented from entering the atmosphere or sequestered from the atmosphere.

How credits work

Carbon credits are generated through certified projects going on around the globe. These projects  allow organisations and individuals to counteract unavoidable greenhouse gas emissions associated with their activities. Offsetting should be the final step after measuring, reducing, and eliminating all GHG emissions possible.

Kinds of carbon credit projects

Offsetting projects vary in kind, for example: reforestation, avoided reforestation (REDD+), biodiversity, or renewable energy such as solar, wind, biomass (bioenergy), hydro, and fuel switching (e.g., cleaner cookstoves).

Projects also vary in quality so must be selected carefully. We recommend initiatives that support community development, including employment within the offsetting project. Initiatives providing co-benefits for the community often contribute to the UN Global Goals – also called Sustainable Development Goals (SDGs).

Types and standards

Not all types of carbon credits and standards are the same and not all offsets are eligible alone for Climate Active carbon neutral certification: these credits are stapled to an approved credit. Climate Active approved abatement includes:

Australian Carbon Credit Units (ACCUs) are issued by Australia’s Clean Energy Regulator (CER), a Federal Government body responsible for advancing carbon abatement through the Australia’s Emissions Reduction Fund (ERF).

Verified Emissions Reductions Standards (VERs)

  • VCS-VERRA is referred to as the Verified Carbon Standard (VCS). VERRA carbon credits come from clean energy generation and nature-based solutions designed to protect, sustainably manage, and regenerate ecosystems.
  • Gold Standard (GS-VER) projects focus on climate action and community development. Typically the Gold Standard incorporates global initiatives such as the UN Global Goals.

Certified Emissions Reductions (CER) is a tradable unit in the EU Emissions Trading System (ETS). One CER represents one carbon credit, or one tonne of carbon equivalent (tCO2-e).

GreenPower LGCs (Large-scale Generation Certificates) is the only voluntary government accredited program the guarantees your electricity is matched with power from certified renewable sources. The retailer purchases and surrenders LGCs (Large-scale Generation Certificates) on the customer’s behalf. One LGC represents one megawatt-hour (MWh) of renewable electricity. While the program is similar to carbon offsets, it does mean that energy used has zero emissions in the first place. And like carbon offsets, LGC’s are retired to prevent double counting or duplication.

Stapled credits to meet Climate Active abatement

Not all credits can be used alone as abatement for Climate Active but add important environmental benefits. ‘Stapling’ to an approved offset demonstrates a genuine commitment to regenerate the environment. Here are three examples:

  • Natural Capital Units (NCUs) pair Verified Carbon Units (VCUs) with government-certified Vegetation Units. Each NCU permanently protects of 1m2 of native habitat, the equivalent of one carbon credit, or one tonne of CO2-e.
  • Greenfleet restores native forests and biodiversity through reforestation in Australia and New Zealand.
  • Canopy Blue is a large-scale initiative involving the cultivation of seaweed offshore. These projects sequester carbon, regenerate oceans, and may be used as a biofuel.

Who is behind the VCS-Verra and GS-VER standards

The Verra Standard and Gold Standards account for the greatest volume of carbon credit transactions in the carbon market.

Logo - Verified Carbon Standard (VCS), a global carbon offsetting standardEstablished in 2005, the Voluntary Carbon Standard (VCS) consists of founding partners: The Climate Group, International Emissions Trading Association (IETA), The World Economic Forum, as well as the World Business Council for Sustainable Development (WBCSD). Leaders in these organisations created the VCS standard to establish quality assurance in the voluntary carbon market.

Logo-Gold Standard (GS VER), a global carbon offsetting standardThe WWF established the Gold Standard (GS-VER) in 2003 along with other international NGOs. Similarly, these organisations wanted to ensure quality and genuine emissions reductions in the voluntary market and to contribute to the sustainable development of communities around the world.

Offsetting is voluntary and not related to compliance schemes

Carbon credits are documented officially on the appropriate registry: the Gold Standard Impact Registry or the VCS-Verra Registry. Offsetting is voluntary and we ensure that evidence of your actions – proof of purchase and retirement of credits – is transparently linked to your business.

Reasons for carbon offsetting

  • To demonstrate good governance: environmental and social accountability.
  • To provide evidence of sustainability actions and policies for tenders and other commercial opportunities. Voluntary actions such as purchasing carbon credits provide a competitive edge, particularly when part of a carbon footprint.
  • To comply with the Australian Government-endorsed Climate Active program. Offsetting emissions that cannot be eliminated from an organisation’s activities is part of the carbon neutral certification process.
  • To attract and retain highly qualified employees. Good environmental policies that also engage employees – such as the selection of carbon offsets – fosters loyalty.

Australian project or global projects?

While Australia has a range of carbon credit projects, global initiatives offer a wealth of offsetting opportunities for the voluntary market – Australia benefits from emissions reductions anywhere on the Planet.

As well as looking to projects that contribute to the UN Global Goals, we suggest prioritising offsets that employees enthusiastically support and align with company values and activities. Taking these factors into account may lead to an Australian initiative or elsewhere.