Carbon offsets are not all the same — but the biggest risk for businesses isn’t whether an offset is classed as “removal” or “avoidance.” It’s relying on low-quality projects, using offsets instead of reducing emissions, or making claims that don’t stand up to regulatory scrutiny. With EU rules tightening, understanding how offsets work and how they’re governed is now essential.
You’ve measured your carbon footprint and started reducing emissions where you can. The remaining question is how to responsibly address the emissions you can’t yet eliminate – without undermining credibility or exposing your business to future regulatory risk.
That’s where understanding the offset landscape properly matters.
The Two Main Types of Voluntary Carbon Offsets
Carbon offsets are generally grouped by how they reduce climate impact.
Carbon avoidance offsets: preventing future emissions
Avoidance projects stop greenhouse gases from being released in the first place. Common examples include:
- Renewable energy projects such as wind, solar, or hydro that displace fossil-fuel power generation
- Clean cooking initiatives that replace open-fire or coal-based cooking with efficient stoves or biogas systems
- Industrial efficiency upgrades, for example capturing methane from landfills or improving cement and steel processes
- Forest conservation and REDD+ projects that prevent deforestation and associated emissions
These projects reduce the flow of new emissions into the atmosphere and are widely used in compliance and voluntary markets, particularly when verified under recognised standards such as Gold Standard or UN-backed mechanisms.
Carbon removal offsets: taking CO₂ out of the atmosphere
Removal projects deal with emissions that are already contributing to climate change. Examples include:
- Direct air capture (DAC) facilities that extract CO₂ directly from ambient air and store it underground
- Biochar projects, where organic waste is converted into stable carbon and applied to soils
- Afforestation and reforestation, where new biomass is grown to absorb atmospheric CO₂
- Enhanced weathering, using minerals that chemically bind CO₂ as they break down
These projects reduce the stock of CO₂ in the atmosphere, often with higher measurement certainty and longer-term storage (though typically at significantly higher cost and more limited scale today).
Why the Difference Matters
Much of the current debate frames removal as “good” and avoidance as “bad.” That framing misses the real issue.
The credibility of an offset depends less on its category and more on:
- Additionality – would the project have happened anyway?
- Permanence – how long is the climate benefit likely to last?
- Verification and governance – is performance independently monitored and conservatively measured?
High-quality avoidance projects verified under frameworks like Gold Standard or UN-recognised programmes apply strict rules around baselines, monitoring, and independent auditing. Poorly designed projects — whether avoidance or removal — fail on these same criteria.
In other words, quality and governance matter more than labels.
How Offsets Fit Into a Credible Climate Strategy
A practical way to think about climate action is sequence:
- Reduce emissions first through efficiency, electrification, renewable energy, and process changes
- Use offsets only for residual emissions that cannot yet be eliminated
- Select offsets conservatively, prioritising verified projects and diversified portfolios
Avoidance projects can play a legitimate role in the near term – particularly where they deliver rapid, scalable emission reductions – while removal capacity continues to scale globally. Removal becomes increasingly important over time, especially for long-term net-zero alignment.
The problem regulators are addressing is not the existence of avoidance offsets, but their misuse as a shortcut.
The ECGT Directive: New Rules for Climate Claims
The landscape for carbon offset claims is about to change dramatically with the European Union's Empowering Consumers for the Green Transition (ECGT) directive, officially known as Directive 2024/825. This regulation, which EU member states must implement by March 2026, fundamentally reshapes what businesses can say about their environmental impact.
The directive introduces strict new rules around environmental claims, with particular focus on carbon neutrality statements. Under these new regulations, businesses cannot make general environmental claims like "carbon neutral," "climate neutral," or "net zero" based solely on offset purchases unless those offsets meet very specific criteria.
Its core intent is clear:
- Carbon neutrality claims must be rooted in real, internal emission reductions
- Offsets may only address residual emissions, not replace action
- Claims must be precise, evidenced, and verifiable
Quality standards for acceptable offsets become much more stringent. The directive requires that any offsets used to support neutrality claims must be additional, permanent, and independently verified. This increases scrutiny on avoidance offsets that cannot convincingly demonstrate additionality, permanence, and independent verification.
Certain removal offsets may be easier to substantiate under stricter verification requirements, particularly where long-term storage can be clearly demonstrated. Because removal offsets typically offer better permanence and easier verification, they're more likely to meet the directive's strict requirements. Companies relying heavily on avoidance offsets may find their current climate claims no longer compliant with EU law.
Implications for Business Strategy
The ECGT directive creates both challenges and opportunities for businesses serious about climate action. Companies that have built their sustainability strategies around purchasing large quantities of low-cost avoidance offsets will need to fundamentally rethink their approach.
Emission reduction becomes the primary focus. Under the new rules, you can't offset your way to carbon neutrality without first making substantial reductions in your actual emissions. This means investing in energy efficiency, switching to renewable power, and redesigning processes to eliminate emissions at the source.
Offset quality becomes more important than quantity. Rather than buying the cheapest offsets available, businesses will need to invest in higher-quality removal offsets that meet the directive's strict criteria. This typically means higher costs per ton of CO2e, but greater credibility for climate claims.
Documentation and verification requirements increase significantly. The directive requires detailed documentation of both emission reduction efforts and offset quality. Companies will need robust systems to track and verify their climate actions, not just their offset purchases.
Marketing and communications must become more precise. Broad claims about being "carbon neutral" or "climate positive" will require much more careful substantiation. Companies may need to shift toward more specific claims about emission reductions and the role of offsets in their overall strategy.
Why Portfolio Design and Verification Matter
One of the most effective ways to manage offset risk is portfolio-based offsetting.
Rather than relying on a single project or methodology, a portfolio approach:
- Spreads risk across geographies and project types
- Reduces dependence on any single assumption or counterfactual
- Allows underperformance in one area to be balanced by stronger outcomes elsewhere
Beyond diversification, credibility depends on how projects are chosen.
Alongside spreading offsets across different project types and regions, Switch2Zero applies its own due diligence to every project it includes, assessing them against the Integrity Council’s Core Carbon Principles. In simple terms, this means checking whether projects genuinely deliver what they claim – including whether they are truly additional, conservatively measured, long-lasting, and free from double counting or leakage.
Projects are also reviewed for wider social and environmental impact, value for money, and governance risk. Where these risks are high, projects are excluded regardless of price.
Switch2Zero members benefit from offsets being purchased in pooled buying cycles and allocated across verified projects, targeting a consistent average price per tonne of CO₂e (£6.50 / $7.50 / €7.50). This approach helps avoid the volatility that comes from relying on a single project or methodology.
Transparency underpins the approach. Switch2Zero maintains a public ledger showing every offset transaction made on behalf of members, supported by retirement certificates and proof of payment – an increasingly important consideration as scrutiny of climate claims increases. See more on Switch2Zero’s carbon offsetting approach.
What Business Leaders Should Take Away
- Offset type alone does not determine credibility
- Poor-quality offsets of any kind create regulatory and reputational risk
- High-quality, verified avoidance projects remain valid for residual emissions today
- Removal will play a growing role, but supply and cost constraints remain real
- Transparent communication matters as much as technical detail
The businesses best positioned for the future are those that treat offsets as a carefully governed component of a broader transition — not as a marketing tool.
Building Climate Claims That Last
As climate regulation tightens, credibility becomes a competitive advantage.
That credibility is built by:
- Reducing emissions decisively
- Choosing offsets verified under trusted standards
- Using portfolios to manage uncertainty
- Communicating clearly about what offsets can — and cannot — do
The question is no longer whether to use offsets, but whether your approach will still stand up to scrutiny in five years’ time.
Now is the moment to review your strategy, stress-test your offset choices, and ensure your climate claims reflect substance rather than shortcuts.
Switch2Zero helps organisations reduce emissions, manage residuals responsibly, and communicate climate impact with confidence. Book a free, no-obligation consultation to review your current approach..
This article reflects current understanding of the ECGT directive and voluntary carbon markets as of January 2026. Regulatory interpretations may evolve, and organisations should seek specialist advice when developing climate strategies.
