Carbon neutrality, or having a net zero carbon footprint, refers to achieving net zero carbon emission into atmosphere either by balancing amount of carbon released into atmosphere with an equivalent amount of CO2 sequestered or offset, or buying enough carbon credits to make up the difference. It is used in the context of carbon dioxide (CO2) releasing processes associated with transportation, energy production, and industrial processes such as production of carbon neutral fuel. The term climate neutral reflects the broader inclusiveness of other greenhouse gases in climate change as well.

The best practice for organizations and individuals seeking carbon neutral status entails reducing and/or avoiding carbon emissions first so that only unavoidable emissions are offset. Carbon neutral status is commonly achieved in two ways:

  • Balancing CO2 released into the atmosphere from burning fossil fuels, with renewable energy that creates a similar amount of useful energy, so that the carbon emissions are compensated, or alternatively using only renewable energies that don't produce any carbon dioxide (also called a post-carbon economy).
  • Carbon offsetting by paying others to remove or sequester 100% of the carbon dioxide emitted from the atmosphere – for example by planting trees  – or by funding so called carbon projects  that should lead to the prevention of future greenhouse gas emissions, or by buying carbon credits in order  to remove or retire them from market.

Carbon retirement involves retiring allowances from Emission Trading Schemes (ETS) as a method for offsetting carbon emissions. Under schemes such as the European Union ETS, EU Emission Allowances (EUAs) represent the right to release carbon dioxide into the atmosphere, and are issued to all the largest polluters. Buying these allowances and permanently removing them forces governments and industrial companies to reduce their emissions. Over time, the scheme will offer fewer allowances, making it much harder for industrial companies to sustain high emission levels without incurring financial penalties.
Unlike traditional offsetting projects, retirement is straightforward and transparent. There are no complex projects, methodologies, brokers or intermediaries and the issue of additionality is overcome.

carbon offset is a reduction in emissions of CO2 or greenhouse gasses made in order to compensate for or to offset an emission made elsewhere, measured in metric tons of CO2 equivalent and may represent six primary categories of greenhouse gases. One carbon offset represents the reduction of one metric ton of carbon dioxide or its equivalent in other greenhouse gases. Offsets are typically achieved through financial support of projects that reduce the emission of greenhouse gases in the short- or long-term. The most common project type is renewable energy or planting.

carbon credit is a generic term for any tradable certificate or permit representing the right to emit one ton of carbon dioxide or of another greenhouse gas with a carbon dioxide equivalent to one ton. The goal is to allow market mechanisms to drive industrial and commercial processes in the direction of lesser emissions

Mitigation Reducing the amount of future climate change is called mitigation of climate change. The IPCC defines mitigation as activities that reduce greenhouse gas (GHG) emissions, or enhance the capacity of carbon sinks to absorb GHGs from the atmosphere. Studies indicate substantial potential for future reductions in emissions by a combination of emission-reducing activities such as energy conservation, increased energy efficiency, and satisfying more of society's power demands with renewable energy and/or nuclear energy sources. Climate mitigation also includes acts to enhance natural sinks, such as planting materials used for biofuel production or reforestation.