Carbon offsets: what buying a credit actually claims to cancel

The short version

Buying a carbon offset does not physically erase a specific ton of CO2 from the atmosphere the moment the transaction occurs. Instead, it purchases a certificate representing a claimed reduction or storage of emissions elsewhere. The core mechanism relies on additionality (the project would not have happened without the funding) and permanence (the stored carbon stays stored).

In 2024, the Science Based Targets initiative (SBTi) clarified that environmental attribute certificates, including offsets, can be used for mitigation beyond a company's direct value chain. Market analysis suggests this move opened the door to a wave of structured corporate buying [1]. However, the market remains split between regulated compliance credits and voluntary projects, with distinct rules and risks for each.

This guide focuses on the mechanics of the claim, not the physics of the atmosphere. It is not financial advice.

How the ledger works

The system functions as a ledger of environmental attributes rather than a direct cleanup service. When a buyer purchases a credit, they are funding a project that generates a specific quantity of avoided emissions or stored carbon.

According to market analysis, the sector is currently dominated by compliance credits, which account for roughly 62% of the market by value. These are driven by regulated Emissions Trading Systems (ETS) globally, where companies are legally required to hold credits to cover their emissions [2]. In contrast, the voluntary sector—often where individuals or companies buy to offset residual emissions—operates under different standards and lacks the same mandatory backing.

For forest-based projects, the mechanism involves landowners managing their land to enhance carbon storage. By participating in these markets, landowners can generate income while reducing greenhouse gas emissions [3]. The credit represents the difference between the carbon stored under the new management plan versus a "business as usual" baseline.

What the data shows

The data driving these markets comes from specific project types and regulatory frameworks.

• Regulated Programs: The majority of market value comes from mandatory schemes where governments set caps on emissions.
• Nature-Based Solutions: A significant portion of voluntary credits comes from forestry. Reports indicate that these programs offer prospects for landowners to manage for enhanced storage [3].
• Corporate Pledges: The surge in demand is linked to the broader push for science-based targets, though the specific number of companies driving the 2024 shift varies by source.

The complexity of the claim

The rapid evolution of carbon markets has created complexity that can be difficult to navigate. For forest landowners and buyers alike, understanding the specific opportunities and requirements of different programs is challenging [4].

Key uncertainties remain that buyers should weigh:

• Additionality: It can be difficult to prove that a project would not have happened without the offset funding.
• Permanence: Stored carbon in forests can be released again through fire, disease, or policy changes.
• Verification: While digitized measurement platforms are emerging to address opacity in legacy projects, the standards vary significantly between the voluntary and compliance sectors.

Buying a credit is a financial transaction that claims to support climate mitigation, but it is not a guaranteed physical eraser of the buyer's specific emissions.

Going further

• Carbon Offset Carbon Credit Market Report – A detailed breakdown of market size, the split between compliance and voluntary credits, and the role of regulated ETS programs.
• Introduction to Forest Carbon, Offsets and Markets – An educational guide from OSU Extension Service on how forest landowners participate in carbon markets and the mechanics of storage.