Carbon Offsetting
Carbon offsetting is the compensation of unavoidable greenhouse gas emissions by purchasing credits from verified climate protection projects that avoid emissions elsewhere or remove CO2 from the atmosphere.
Carbon offsetting refers to financially compensating for greenhouse gas emissions that a company cannot prevent itself despite all avoidance and reduction efforts. To do so, it buys emission credits (carbon credits) from certified climate protection projects – such as reforestation, renewable energy, peatland rewetting or the distribution of efficient cookstoves – that demonstrably save emissions or sequester CO2 from the atmosphere. As a rule, one credit corresponds to one tonne of CO2 equivalent avoided or removed.
Offsetting sits at the end of the so-called climate mitigation hierarchy: emissions must first be avoided, then reduced, and only the unavoidable residual emissions should be compensated. Credible offsetting requires that the underlying projects meet the criteria of additionality, permanence, avoidance of double counting and independent verification. Recognised standards such as the Verified Carbon Standard (VCS/Verra) or the Gold Standard are intended to ensure this quality.
In the reporting context, a clear distinction must be drawn between actual emission reduction and offsetting. Under the ESRS, in particular ESRS E1, companies must disclose their gross emissions (Scope 1, 2 and 3) as well as the carbon credits purchased separately; offsets may not be deducted from their own emissions to embellish target achievement. Advertising claims such as "climate neutral" based on mere offsetting are also coming under increasing pressure from the EU Green Claims initiative and the ban on misleading environmental claims.
Legal Basis
ESRS E1 (in particular disclosure on carbon credits/GHG removals); GHG Protocol; ISO 14064; VCS (Verra) and Gold Standard
Practical Example
A mid-sized machinery manufacturer has already significantly cut its Scope 1 and Scope 2 emissions through efficiency measures and green electricity, but cannot further reduce the diesel consumption of its service fleet in the short term. The compliance officer documents these residual emissions, purchases Gold Standard credits from a reforestation project to compensate, and discloses gross emissions and the volume of credits used separately in the sustainability report – without netting the residual emissions to zero, in order to avoid greenwashing allegations.