Carbon offsetting is a carbon trading mechanism that enables entities such as governments or businesses to compensate for (i.e. “offset”) their greenhouse gas emissions by investing in projects that reduce, avoid, or remove emissions elsewhere. When an entity invests in a carbon offsetting program, it receives carbon credits. These "tokens" are then used to account for net climate benefits from one entity to another. A carbon credit or offset credit can be bought or sold after certification by a government or independent certification body. One carbon offset or credit represents a reduction, avoidance or removal of one metric Tonne of carbon dioxide or its carbon dioxide-equivalent (CO2e).

Carbon emission trading (also called carbon market, emission trading scheme (ETS) or cap and trade) is a type of emission trading scheme designed for carbon dioxide (CO2) and other greenhouse gases (GHG). It is a form of carbon pricing. Its purpose is to limit climate change by creating a market with limited allowances for emissions. This can reduce the competitiveness of fossil fuels, and instead accelerate investments into renewable energy, such as wind power and solar power. Fossil fuels are the main driver for climate change. They account for 89% of all CO2 emissions and 68% of all GHG emissions.