Guide to Carbon Credits (Carbon Offsets)

Carbon Credits Explained

One carbon credit either prevents greenhouse gas (GHG) emissions or represents the removal of GHGs from the atmosphere. In either case, a carbon credit is measured against a business-as-usual baseline: one carbon credit equals one tonne of CO₂-e (carbon dioxide equivalent). Put another way, one tonne of carbon is either prevented from entering the atmosphere or removed from it.

How Do Carbon Credits Work?

Carbon credits are generated through certified projects around the globe. These projects enable organisations and individuals to offset unavoidable greenhouse gas (GHG) emissions associated with their activities.

Kinds of Carbon Credit Projects

Offset projects vary in type, including reforestation, avoided deforestation (REDD+), biodiversity, and renewable energy projects such as solar, wind, biomass (bioenergy), hydro, and fuel switching (for example, cleaner cookstoves).

Projects also vary in quality and must be selected carefully. We recommend initiatives that support community development, including employment opportunities within the project itself. Initiatives that provide community co-benefits often contribute to the UN Global Goals, also known as the Sustainable Development Goals (SDGs).

Types of Carbon Credits and Eligibility Under Climate Active and the Safeguard Mechanism

Not all carbon credits and standards are the same, and not all offsets are eligible on their own for Climate Active carbon neutral certification. Some credits must be bundled with an approved credit.

Australian Carbon Credit Units (ACCUs)

ACCUs are issued by Australia’s Clean Energy Regulator (CER), a Federal Government body responsible for advancing carbon abatement through Australia’s Emissions Reduction Fund (ERF). ACCUs are eligible credits under the Federal Government’s Climate Active program, as well as under the Safeguard Mechanism.

Verified Carbon Standard (VCS)

VCS-Verra is referred to as the Verified Carbon Standard (VCS). Verra carbon credits are generated from clean energy projects and nature-based solutions designed to protect, sustainably manage, and restore ecosystems.

Gold Standard (GS-VER)

Gold Standard (GS-VER) projects focus on climate action and community development and typically incorporate global initiatives such as the UN Sustainable Development Goals.

Certified Emissions Reductions (CERs)

Certified Emissions Reductions (CERs) are tradable units in the EU Emissions Trading System (ETS). One CER represents one carbon credit, or one tonne of carbon dioxide equivalent (tCO₂-e).

GreenPower LGCs

GreenPower LGCs (Large-scale Generation Certificates) are part of a voluntary government-accredited program that matches your electricity use with certified renewable energy.

Retailers purchase and surrender LGCs on your behalf, with each certificate representing one megawatt-hour (MWh). LGCs ensure zero-emissions energy at generation and are retired to prevent double counting.

Stapled Credits

Not all credits can be used on their own for Climate Active compliance, but they still provide valuable environmental benefits. When “stapled” to an approved offset, they demonstrate a stronger commitment to environmental regeneration.

Here are three examples:

• Natural Capital Units (NCUs) pair Verified Carbon Units (VCUs) with government-certified Vegetation Units. Each NCU permanently protects 1 m² of native habitat, equivalent to one carbon credit, or one tonne of CO₂-e.
• Greenfleet restores native forests and biodiversity through reforestation projects in Australia and New Zealand.
• Canopy Blue is a large-scale initiative involving the offshore cultivation of seaweed. These projects sequester carbon, regenerate oceans, and may be used as a biofuel source.

Who is behind the VCS-Verra and GS-VER Standards?

The Verra Standard and Gold Standard account for a significant share of carbon credit transactions in the voluntary carbon market.

The Verified Carbon Standard (VCS), a global carbon offsetting standard, was established in 2005. It was founded by partner organisations including The Climate Group, the International Emissions Trading Association (IETA), the World Economic Forum, and the World Business Council for Sustainable Development (WBCSD). Leaders from these organisations created the VCS to establish quality assurance in the voluntary carbon market.

The Gold Standard (GS-VER), also a global carbon offsetting standard, was established in 2003 by the World Wide Fund for Nature (WWF) in collaboration with other international NGOs. These organisations similarly aimed to ensure quality and genuine emissions reductions in the voluntary market while contributing to sustainable development in communities around the world.

Understanding Voluntary Carbon Offsetting

Carbon credits are officially recorded on the appropriate registry, such as the Gold Standard Impact Registry or the VCS-Verra Registry. Offsetting remains voluntary, and we ensure that evidence of your actions, including proof of purchase and retirement of credits, is transparently linked to your business.

Reasons for Carbon Offsetting

• To demonstrate good governance through environmental and social accountability.
• To provide evidence of sustainability actions and policies for tenders and other commercial opportunities. Voluntary actions, such as purchasing carbon credits, provide a competitive edge, particularly when included as part of a carbon footprint.
• To comply with the Australian Government-endorsed Climate Active program. Offsetting emissions that cannot be eliminated from an organisation’s activities is part of the carbon neutral certification process.
• To attract and retain highly qualified employees. Strong environmental policies that also engage employees, such as the selection of carbon offsets, foster loyalty.

Australian Projects or Global Projects?

While Australia has a range of carbon credit projects, global initiatives offer a wealth of offsetting opportunities for the voluntary market. Australia benefits from emissions reductions anywhere on the planet.

As well as considering projects that contribute to the UN Global Goals, we suggest prioritising offsets that employees enthusiastically support and that align with company values and activities. Taking these factors into account may result in choosing an Australian initiative or one located elsewhere.

Build a Carbon Offsetting Strategy

We have extensive experience helping our clients build tailored, low-risk carbon credit portfolios. Click here to learn more about our carbon offsetting strategy.