Carbon offsets are used to reduce the amount of carbon that an individual or institution emits into the atmosphere. Carbon offsets work in a financial system where, instead of reducing its own carbon use, a company can comply with emissions caps by purchasing an offset from an independent organization. The organization will then use that money to fund a project that reduces carbon in the atmosphere. An individual can also engage with this system and similarly pay to offset his or her own personal carbon usage instead of, or in addition to, taking direct measures such as driving less or recycling.

Carbon offsets are most often used by companies or institutions to reduce their carbon footprint without actually polluting less. Most offsets involve renewable energy. For example, a company in Massachusetts can pay to build a wind turbine off the coast. By using its money to create renewable energy, that company thereby offsets its own carbon use.