Glossary term
Carbon Neutrality
Subject: Sustainability and ESG, Climate Risk
Also known as: Carbon neutral, Climate neutrality
Carbon neutrality means a company, product or event has balanced its greenhouse gas emissions with an equal amount of removals or purchased offsets, so its stated net contribution over a period is zero.
Explanation
The claim is a balance, not an absence. An entity measures its emissions, cuts what it can, and then cancels the rest by buying credits from projects elsewhere or by removing carbon itself. Rules on what may be counted differ by scheme, and some require a public standard, third-party checks and a stated boundary. Critics point out that a firm can reach neutrality largely by buying cheap credits while its own emissions stay high. Net zero is a stricter idea: it expects deep cuts across the whole value chain and allows offsets only for a small remainder. Regulators in several places now limit "carbon neutral" labels in advertising. A neutral label resting on cheap credits invites a greenwashing complaint, and regulators now ask to see the evidence.
Example
An airline advertises "carbon neutral flights" on a route. Its emissions that year were 100,000 tonnes, and it bought 100,000 tonnes of credits. A regulator asks for evidence that the credits were genuine, were not counted twice, and that the airline had a plan to cut fuel use itself. Without that, the label is withdrawn.
Not to be confused with
- Net Zero
- Net zero requires steep cuts in all emissions with only residual amounts removed. Carbon neutrality can be reached mostly by offsetting, and often covers a narrower boundary.