Two very different things sold under one word
"Carbon offset" is used for any credit you buy to balance your own emissions. Underneath, there are two kinds of credit, and they do different jobs:
| Avoidance or reduction credit | Removal credit | |
|---|---|---|
| What it pays for | Emissions that would otherwise have happened don't happen | CO2 already in the air is taken out and stored |
| Examples | Landfill gas capture, efficient cookstoves, renewable power, avoided deforestation | New woodland, soil carbon, biochar, direct air capture with storage |
| Does the atmosphere end up with less CO2? | No, it ends up with less than it otherwise would have | Yes, for as long as the carbon stays stored |
| Counts towards net zero? | No | Yes, but only for residual emissions, and permanence matters |
Our guide to carbon offsetting for business covers how to judge any credit's quality. This post is about the narrower question: which kind, if any, a small firm should care about.
Why the difference matters for net zero
Net zero means the emissions you put into the air are balanced by removals you take out. An avoidance credit can't do that: your tonne still went into the atmosphere, and the project only stopped another tonne joining it. That's why the SBTi's Corporate Net-Zero Standard allows only removals to neutralise the residual emissions left at net zero, and expects cuts of at least 90% before that for most companies.
Version 2.0 of the standard, adopted by the SBTi's board on 21 May 2026 and in effect from 31 January 2027, goes further. It sets out how long removal storage is expected to last, and adds a requirement to support removals from 2035 for larger, Category A companies. Most small firms are expected to fall into Category B. Our science-based targets guide explains the categories.
What it looks like for a small firm
Take an illustrative firm with an office using 30,000 kWh of electricity and 60,000 kWh of gas a year, and diesel vans covering 25,000 miles. At the 2026 government factors:
- Scope 1 and 2 today: 25.21 tonnes CO2e.
- At net zero, after a 90% cut, about 2.52 tonnes would be left for removals to neutralise.
Buying credits today for the whole 25.21 tonnes would not make this firm net zero, whatever the label on the credits. Switching the vans to electric at replacement and the gas boiler to a heat pump would do far more, and would show in the reported figures. Our net zero guide for small businesses sets out the order to tackle things in.
How removals are reported
The GHG Protocol published its Land Sector and Removals Standard on 30 January 2026, with an effective date of 1 January 2027. Two points matter to a small business:
- Removals in your own operations or value chain, such as carbon stored in soil on farmland you manage, can be reported, but always as a separate figure from emissions, never netted off silently. You must keep monitoring the storage and report any losses.
- Credits you buy are quantified differently and reported separately from your inventory. The standard says credits can't be used directly as part of a greenhouse gas inventory; they can support a separate compensation or contribution target.
The UK government's Environmental Reporting Guidelines take the same line: report your gross figure, and if you buy good quality credits, show a net figure alongside it, never instead of it. A PPN 006 Carbon Reduction Plan reports gross emissions and real reductions too.
Permanence: the catch with removals
A removal is only worth something while the carbon stays out of the air. Trees can burn, be felled or die of disease; soil carbon can be lost when land management changes. Engineered storage in rock or underground is expected to last far longer, at a much higher price per tonne.
The UK is drawing the line in its own carbon market. In July 2025 the UK ETS Authority said it aims to bring greenhouse gas removals into the UK Emissions Trading Scheme, with integration operational by the end of 2029, and that removals will need to show a minimum storage period of 200 years to be eligible. It had not decided whether woodland removals will be included, and we have not found a later decision. That is a compliance market for large emitters, not the voluntary market a small business buys from, but it shows how seriously permanence is now taken.
UK nature-based removals have their own standards. Our post on the Woodland Carbon Code and Peatland Code explains what UK woodland and peatland units are and what you can say about them.
What is still being decided
The government consulted in 2025 on raising integrity in voluntary carbon and nature markets and published a summary of responses in March 2026, saying its formal response would follow in summer 2026. When we checked in October 2026 the consultation page still showed only the summary of responses. The consultation proposed endorsing the Integrity Council for the Voluntary Carbon Market's Core Carbon Principles as a minimum standard for credit quality, and the VCMI's Claims Code of Practice for how companies describe their use of credits. Expect more guidance once the response is out.
A sensible order of things
- Measure your Scope 1, 2 and main Scope 3 emissions.
- Set a reduction target and cut the biggest sources first.
- If you want to fund projects now, treat it as a contribution on top of your cuts, and describe it exactly.
- Plan for permanent removals only for the residual at your net zero date.
How you word any of this matters. See our posts on net zero, carbon neutral and climate positive and insetting versus offsetting.
How Carbon Recycling helps
Carbon Recycling reports your gross Scope 1, 2 and 3 emissions with the government factors and never nets credits off them. Its Carbon Reduction Plan charts your path from your baseline to your interim target and on to net zero, assuming at least a 90% cut with the rest left for removals, and states that offsets are not counted towards the reductions. We don't sell offsets or credits.