Australian businesses are under increasing pressure to understand and manage their greenhouse gas emissions. Whether driven by sustainability goals, customer expectations, or regulatory obligations, many organisations are looking for practical ways to reduce their environmental impact.
One term that often comes up in these discussions is a carbon offset. While widely used, it is frequently confused with carbon credits and Australian Carbon Credit Units (ACCUs).
A carbon offset is a way of compensating for greenhouse gas emissions by supporting projects that reduce or remove an equivalent number of emissions elsewhere.
In Australia, these projects can generate Australian Carbon Credit Units (ACCUs), which represent one tonne of carbon dioxide equivalent (CO₂-e) that has been avoided or removed from the atmosphere.
Understanding how carbon offsets work is an important first step for any business exploring emissions management. This guide explains what carbon offsets are, how they work in Australia, and the role carbon credits and ACCUs play in the process.
Key Takeaways
- What is a carbon offset? A carbon offset compensates for greenhouse gas emissions by supporting projects that reduce or remove an equivalent amount of emissions.
- What is a carbon credit? A carbon credit represents one tonne of carbon dioxide equivalent (CO₂-e) reduced or removed.
- What is an ACCU? An Australian Carbon Credit Unit (ACCU) is Australia’s official carbon credit issued under the Australian Carbon Credit Unit Scheme.
- Who issues ACCUs? The Clean Energy Regulator issues ACCUs to eligible projects after verified emissions outcomes.
- Should businesses offset before reducing emissions? No. Carbon offsets work best alongside efforts to reduce emissions wherever possible.
What Is a Carbon Offset?
A carbon offset helps balance emissions that cannot currently be avoided. Most organisations begin by reducing emissions wherever possible through measures such as improving energy efficiency, switching to renewable electricity, or optimising operations.
However, some emissions may remain unavoidable. Carbon offsets provide a way to compensate for those remaining emissions by supporting eligible projects that either remove greenhouse gases from the atmosphere or prevent additional emissions from occurring.
These projects can include activities such as environmental plantings, landfill gas capture, savanna fire management and improvements in soil carbon. Each project follows an approved methodology to measure the emissions it avoids or removes.
The outcome is that the environmental benefit created by one project can help compensate for emissions produced elsewhere.
Carbon offsets are designed to complement emissions reduction efforts, not replace them. They form one part of a broader climate strategy by helping businesses:
- Compensate for emissions that cannot currently be avoided.
- Support verified emissions reduction and removal projects.
- Contribute to broader sustainability and climate goals.
- Complement ongoing efforts to reduce emissions across operations.
How Do Carbon Offsets Work?
Carbon offsets are created through projects that deliver measurable emissions reductions or remove carbon dioxide from the atmosphere.
In Australia, eligible projects operating under the Australian Carbon Credit Unit (ACCU) Scheme may receive ACCUs after their emissions outcomes have been measured, verified and approved by the Clean Energy Regulator.
Each ACCU represents one tonne of carbon dioxide equivalent (CO₂-e) stored or avoided through an eligible project.
Businesses can acquire ACCUs as part of their emissions management strategy, allowing them to compensate for eligible emissions while supporting projects that contribute to Australia’s emissions reduction efforts.
Although the process may appear technical, it follows a straightforward sequence:
- An eligible carbon project is developed.
- The project’s emissions outcomes are measured and verified.
- Eligible ACCUs are issued.
- Businesses can acquire ACCUs to compensate for eligible emissions.
This framework helps create consistency and transparency across Australia’s carbon market while supporting verified emissions reduction activities.
Carbon Offsets vs Carbon Credits: What’s the Difference?
The terms carbon offset and carbon credit are often used interchangeably, but they refer to different concepts.
A carbon offset is the outcome of compensating for greenhouse gas emissions. A carbon credit is the unit that represents the emissions reduction or removal that makes the offset possible.
In simple terms, a carbon credit is the building block, while a carbon offset is the action of using those credits to compensate for emissions.
In Australia, the most common carbon credit is the Australian Carbon Credit Unit (ACCU).
| Carbon Offset | Carbon Credit |
| Compensates for greenhouse gas emissions. | Represents one tonne of CO₂-e reduced or removed. |
| Supports an emissions management strategy. | Acts as the verified unit used to create an offset. |
| Can involve one or more carbon credits. | Is issued after verified emissions outcomes. |
Understanding this distinction helps businesses communicate more accurately about sustainability initiatives and carbon management.
What Is an Australian Carbon Credit Unit (ACCU)?
An Australian Carbon Credit Unit (ACCU) is Australia’s official carbon credit.
The Clean Energy Regulator issues ACCUs to eligible projects that reduce emissions or remove carbon dioxide from the atmosphere under the Australian Carbon Credit Unit Scheme.
Each ACCU represents one tonne of carbon dioxide equivalent (CO₂-e) that has been stored or avoided.
Carbon abatement projects can include activities such as:
- Environmental planting
- Human-induced regeneration
- Landfill gas capture
- Soil carbon projects
- Savanna fire management
Before ACCUs are issued, projects must follow approved methodologies, monitor their outcomes and undergo verification to ensure emissions reductions are genuine and measurable.
This framework helps maintain confidence in Australia’s carbon market by ensuring ACCUs are backed by verified emissions outcomes.
Read our complete ACCU Explainer Guide
Why Do Australian Businesses Use Carbon Offsets?
Every business has a different sustainability journey, but many share a common goal: reducing their environmental impact while managing emissions that cannot yet be eliminated.
Carbon offsets may support businesses that:
- Work towards voluntary sustainability or net zero commitments.
- Compensate for unavoidable operational emissions.
- Support verified carbon abatement projects across Australia.
- Strengthen broader climate strategies alongside emissions reduction initiatives.
Carbon offsets are generally most effective after businesses have identified opportunities to reduce their own emissions first. Offsetting complements these efforts rather than replacing them.
What Carbon Offsets Can — and Cannot — Do
Carbon offsets are one tool within a broader emissions management strategy. Understanding both their value and their limitations helps businesses make informed decisions.
What carbon offsets can do
Carbon offsets can:
- Compensate for emissions that cannot currently be avoided.
- Support verified carbon abatement projects.
- Contribute to voluntary climate commitments.
- Encourage investment in emissions reduction activities across Australia.
What carbon offsets cannot do
Carbon offsets cannot:
- Eliminate the need for operational improvements.
- Guarantee the same outcomes across every project type.
- Serve as the only action within a climate strategy.
Businesses typically achieve stronger long-term outcomes by combining emissions reduction with the appropriate use of carbon offsets.
Understanding Australia’s Carbon Market
Australia’s carbon market brings together organisations that generate ACCUs through eligible projects and businesses that acquire them as part of their emissions management strategies.
For organisations looking to understand market activity, pricing and available methodologies, Clima Markets provides market information designed to improve transparency across Australia’s ACCU market. Businesses can explore pricing information and market insights to better understand the carbon market alongside their broader decision-making process.
Frequently Asked Questions
- What is a carbon offset?
A carbon offset is a way of compensating for greenhouse gas emissions by supporting projects that reduce or remove an equivalent amount of emissions elsewhere. It is generally used to address emissions that cannot currently be avoided.
- What is the difference between a carbon offset and a carbon credit?
A carbon offset is the act of compensating for emissions, while a carbon credit is the verified unit that makes the offset possible. In Australia, the most common carbon credit is the Australian Carbon Credit Unit (ACCU).
- What is an ACCU?
An Australian Carbon Credit Unit (ACCU) is Australia’s official carbon credit. Each ACCU represents one tonne of carbon dioxide equivalent (CO₂-e) stored or avoided through an eligible carbon abatement project.
- Are carbon offsets mandatory for Australian businesses?
Not all Australian businesses are required to use carbon offsets. Whether a business chooses to use offsets depends on its sustainability objectives, operational requirements and regulatory obligations.
- How can businesses participate in Australia’s carbon market?
Businesses can participate in Australia’s carbon market in different ways, including acquiring ACCUs to support their emissions management strategy or developing eligible carbon abatement projects under the Australian Carbon Credit Unit Scheme.
Final Thoughts
Understanding carbon offsets is an important step for businesses looking to manage greenhouse gas emissions responsibly. While reducing emissions should remain the priority, carbon offsets can help compensate for emissions that cannot currently be avoided. In Australia, this process is supported by verified carbon abatement projects and Australian Carbon Credit Units (ACCUs), helping businesses contribute to broader emissions reduction efforts.
As Australia’s carbon market continues to evolve, understanding the relationship between carbon offsets, carbon credits and ACCUs can help organisations make more informed decisions about their climate strategies.
Looking to understand Australia’s ACCU market better?
Clima Markets provides market information, pricing insights and methodology-level data to help businesses navigate Australia’s carbon market with greater confidence.
Explore the latest market information at markets.clima.com.au.