Glossary entry

Carbon Offsetting


Carbon Offsetting

Carbon Offsetting means the purchase of a quantity of carbon credits equal to the amount of [organisation name’s] Residual Emissions from a project that has been verified in accordance with [insert name of voluntary standard] or from a United Nations Framework Convention on Climate Change (UNFCCC) clean development mechanism (CDM) [or [successor/ equivalent] UNFCCC mechanism] project.

Drafting notes

Several different market standards have been developed to verify credits from carbon reduction projects for the voluntary carbon market. The most widely used standards are the:

If preferred, the definition could reference the carbon credits that can be used to satisfy obligations under the EU Emissions Trading System.

The credits that can be used under the EU ETS are specified in articles 58-61 of the Fifth Registries Regulation (Commission Regulation (EU) No 389/2013) and Article 11a(8) of the EU ETS Linking Directive 2004 (Directive 2004/101/EC), which was replaced by the EU ETS Amending Directive 2009 (Directive 2009/29/EC). Using this option would mean Emission Reduction Units (ERUs) from UNFCCC Joint Implementation (JI) projects would be permissible for use as offsets

The definition includes an option to allow the purchase of credits from a successor mechanism to the CDM developed by the UNFCCC under Article 6.4 of the Paris Agreement.

For information on how organisations can create carbon emission reductions within their own supply chains that can be used to offset their Carbon Footprint, see the definition of Carbon Insetting.

See also the definition of Residual Emissions.


Corporate climate policies, supply chain agreements, climate laws, finance documentation.

Used in Callum & Theo’s Clause [Climate Standard Transaction Terms].