A carbon credit and a carbon offset are closely related, but they are not exactly the same thing.
A carbon credit is a tradable unit representing a greenhouse gas reduction or removal. One credit normally represents one metric tonne of carbon dioxide equivalent, or CO2e. Credits can be generated by projects such as woodland creation, peatland restoration or other qualifying emissions reduction and carbon removal activities.
Carbon offsetting describes how a credit is used. If a business calculates that it has one tonne of emissions that it wants to compensate for, it could purchase and retire an appropriate carbon credit representing one tonne of CO2e. Retiring the credit removes it from circulation so that it cannot subsequently be used by another buyer for the same purpose.
Carbon credits should not be confused with UK Emissions Trading Scheme allowances. UK ETS allowances are regulatory instruments giving covered organisations permission to account for emissions within a mandatory cap-and-trade scheme, whereas voluntary carbon credits arise from emissions reduction or removal projects.
